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ANNUAL NEWSLETTER 2ND EDITION | @ esgam
MEMBERS ' ESG JOURNEY
GOVERNANCE PILLAR
DATO’ LEE LIN FONG( DSAP)
- Founder of Lee & Partners, Legal Advisor of ESGAM
Good governance Cannot Be Compromised
NOT long ago, the concept of“ Environmental, Social, and Governance( ESG)” was a relatively unfamiliar concept to many of us. Today, however, it has become a familiar presence, something we often hear about and increasingly see in action, playing a major role in reshaping how businesses and regulators approach sustainable development.
While Malaysia has yet to have comprehensive ESG legislation like the European Union’ s Corporate Sustainability Reporting Directive, there have been noticeable changes in recent years towards strengthening ESG-related frameworks. Policies and regulations such as the Malaysian Code on Corporate Governance, Bursa Malaysia’ s sustainability reporting requirements, and sector-specific guidelines were introduced, demonstrating a growing legal and regulatory recognition of ESG principles.
Among the three pillars of ESG, governance can perhaps be said to be the most fundamental. It is the foundation that ensures companies operate in a manner that is responsible, ethical, and transparent. Governance covers the structures and processes through which corporate decisions are made, which involve the Board of Directors, management, shareholders, and other stakeholders.
A strong and effective Board of Directors forms the cornerstone of good governance, guiding a company to identify, address, and integrate Environmental and Social issues into its overall strategy.
As legal advisors to a wide range of companies and organisations, including the ESG Association of Malaysia( ESGAM), we place significant emphasis on the role of the Board of Directors and the overall governance structure when conducting legal and ESG-related due diligence. Our approach goes beyond box-ticking exercises. Instead, we conduct a thorough evaluation of board composition and diversity, independence, frequency and quality of board meetings, and the robustness of conflict-of-interest and decision-making protocols.
In addition, we assess an organisation’ s operational integrity by reviewing internal control systems, enterprise risk management frameworks, and key corporate documents such as shareholder agreements, audited financial statements, ESG disclosures, regulatory filings, permitted licenses, etc.
Leading companies even adopt enhanced governance measures such as whistleblower protection mechanisms, anti-corruption frameworks aligned with the Malaysian Anti-Corruption Commission Act, and detailed conflict-of-interest declarations. These practices reflect a maturing commitment to both ethical conduct and regulatory compliance, standards that one should embrace.
Justice Datuk Seri Hasnah Mohammed Hashim, the current Chief Judge of Malaya, underscored the uncompromising nature of ethical governance in the 2018 Court of Appeal case Menteri Besar Selangor( Pemerbadanan) v Faekah bt Hj Hussin & Ors. Her Ladyship firmly stated:“ We are of the view that accountability, transparency and good governance cannot, in any manner, no matter how urgent it may be, be compromised.” Sound governance is not merely aspirational but a foundational duty that must be upheld at all times. As ESG continues to shape the future of corporate Malaysia, it is important to recognise that good governance must come first, as governance forms the backbone upon which the Environmental and Social pillars are built. A journey of a thousand miles begins with a single step. Embarking on the ESG journey might not be easy, but it is definitely doable and worth pursuing.