Flat Cargo

Corporate Governance

Problem Statement

It is mandatory that all public listed companies are to adhere to the Malaysia Code of Corporate Governance; however, the undermining problem here is that the composition of the board of directors and audit committee does not comply with the Code. Below shows the Hierarchy Chart of Board of Directors and Audit Committee of Flat Cargo Berhad.

BOARD OF DIRECTORS

AUDIT COMMITTEE

According to the Malaysian Code of Corporate Governance, there should be an equal number of executive and non-executive directors (inclusive of independent non-executive directors) in the Board of Directors. This is to ensure that no one individual group dominates the board’s decision making. However, looking at the hierarchy of the Board of Directors, there are more executive directors than non-executive directors. This scenario is unhealthy as non-executive directors’ views might not be taken into consideration in the company’s important decision making process as they have the minority say.

On the other hand the Code for an audit committee states that there should at least be 3 member of whom the majority of them should be independent and all member should be non-executive directors. Although the audit committee of Flat Cargo Berhad reveals that the majority of the committee consist of independent directors but they are all not non-executive member. Therefore, Mr. Ali Bin Ahmad is not a suitable candidate of the committee.

Solution and Recommendation

Firstly, one must be clear of what Executive and Non- Executive Directors and their roles are. Executive Directors are the internal member of the company who are responsible in the daily operation of the company and in the decision making of the management team whereas Non-Executive Directors are the external member who may hold or may not hold a share in the company and they may be hired due to their expertise and entitled for sitting fees for attending the meeting. However, they...