BWFF 5093 CORPORATE GORVERNANCE

INDIVIDUAL ASSIGMENT

(GROUP A)

LECTURE NAME:

DR. HANITA BT KADIR @ SAHAR

STUDENT NAME:

MUHAMAD FITRI BIN SHAHIRAN

826315

UNIVERSITI UTARA MALAYSIA

1.0 OVERVIEW MISC BERHAD

1.1 About MISC Berhad

MISC Berhad a leading company provided of international energy – related to

maritime solutions and services. The core of MISC Berhad energy shipping and its

related activities, owning, and operating offshore floating solutions, marine repair and

conversion, as well as engineering and construction works. The additional to make they

give the good service MISC Berhad place maritime education at the forefront, Malaysian

Maritime Academy (ALAM) is ranked amongst the top 10 of the world’s Maritime

Education and Training (MET) institutions Otherwise MISC Berhad constituent of the

FTSE4Good Bursa Malaysia Index, a testament to our sustainability performance and

strong Environmental, Social and Governance (“ESG”) practices.

1.2 Corporate Governance

MISC Berhad (“MISC” or “the Company”) observes internationally recognised best

practice standards of corporate governance. The Board of Directors (“the Board”),

Management and employees of the Company continue to improve the standard of

corporate governance practices throughout the MISC Group. As a public listed company

on the Main Market of Bursa Malaysia Securities Berhad (“Bursa Securities”), MISC

applies the recommendations as set out in the Malaysian Code on Corporate Governance

2012 (“the Code”) and the requirements of the Main Market Listing Requirements of

Bursa Securities.

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 MISC believes that sound corporate governance practices are fundamental

towards winning investors’ confidence and are prerequisites to achieving the

Company’s ultimate objectives of enhancing long-term shareholders’ value and

protecting shareholders’ interest. The Company has established a Corporate

Governance Framework that is structured based on the responsibilities and

accountabilities of the entities involved. Each layer of responsibility in the framework

is distinctly different but compliments each other in attaining the objectives of the

Group.

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2.0 Overview The MISC Corruption

According the Sundaily on 06 March 2018 “ MISC officials under MACC probe over

alleged corruption of RM 109m”, MISC one of the Government – linked under maritime

now has become under observation of Malaysian Anti – Corruption Commission (MACC)

after they found the company involved in corruption almost RM 109 million last months.

From resource MACC they said MISC officers are involved in this case with third – party

contractors make false claims at jacked up fee and non – existent work for maintained of

ship owned by MISC, from the investigated MACC found the false payment claims made

between 2010 and 2013. Other alleged probed under MACC about commission for

works repair tanked vessel at cost RM 61.6 Million in 2012 but the actual cost for the

works is estimated RM 31 Million, another case was reported MISC loss RM 47 Million

because failed in company procedure in appointment of the contactor.

3.0 The key of Corporate Governance issues Raised in the case

The main Corporate Governance issues in this case is about corruption. As we can

see from Sundaily article was reported MISC involved in corruption almost RM 109 million.

Where they make false payment claim to contactor, pay more commission from should they

pay to contactor and fail to observe procedure to appoint the contactor until company loss

RM 47 million all this involved the big amount and give a big impact to company

Transparency International 2019 Malaysia ranked 51 from 180 countries corruption

perception index. MISC one of company contributed to push up the ranked.

According Transparency International was define “Corruption is the abuse of

entrusted power for private gain. It can be classified as grand, petty and political, depending

on the amounts of money lost and the sector where it occurs”. Corruption the dangerous for

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country and company this issues will make company loss or bankrupt because money

linkage from company with any activities and not get profit and money back.

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3.1 The Major underlying causes of this issues

The main underlying causes of this issues is about the lack of management, and lack

of control system. Under MISC Berhad we can see the lack of control system when the

company approve claim made by contractor without any approval or prove the contractor

already finish the job. Otherwise the officer approve the claim without any checking from top

management before procced the payment. This also show lack management approve

payment without acknowledge top management, Standard of Procedure (SOP) company

also poor that driver to fraud and corruption. The amount to bigger and will give bad impact

to company.

The lack of control MISC Berhad when the company fail monitor process to

appointment of the contactor. This case also involved the big amount almost RM 47

million and this will give bad financial reporting and company will report loss during this

year. Two of the causes of this issues will make company loss during the year and make

investor take out the money and company will become bankruptcy and dissolve.

3.2 Key potential conflicts of interest highlighted in the case

Officer MISC Berhad involved in this case approve the false claim make by contactor

the amount is RM 109 Million, this corruption will make shareholder didn’t trust the top

management handle the company this will make shareholder wealth decreases and make

loss. The high potential company didn’t declare the dividend during this year, not more

investor will invest in this company. Another company cannot run the mega project and loss

the profit. This all thing will give impact to staff and shareholder, where staff no bonus and

incremental salary event they hardworking struggle to make the profit. For shareholder loss

the profit and sharing the loss during the year and cannot attract more investor to invest in

this company and run more project to achieve target profit.

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3.2 Initiatives / programmes done to curb the issues identified as in no 2

MISC Berhad should improve they policies and Standard of Operation (SOP), to

make the biggest amount they should has a layer approval ,first layer Officer in charge and

admin staff, second layer Financial management like financial manager and the third layer

top management. By using this system can reduce the chance officer make false payment

and corruption and also company can avoid the biggest amount to loss.

MISC Berhad should rise up the awareness before appoint the contractor and make

team to review the application before make decision, and process to make decision appoint

the contractor should present first to top management. The top management should make

decision to reduce any uncertain event happen, top management has more experience and

knowledge about what company need and required.

Otherwise, company should increases the salary and bonus for the staff to avoided

fraud and corruption. This incentives and gift can make more sensitive to staff to work hard

and didn’t make any fault to company and increases the awareness to staff about impact to

company and staff if they make fraud and corruption. All this will help company make profit

and not involved in corruption also can attract more investor to invest and can run the mega

project generated the profit. By generated the profit also can increases the shareholder

wealth and declared the high dividend.

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REFERENCES

1. The Sundaily, 06 March 2018 “MISC officials under MACC probe over alleged

corruption of RM109M”. Retrieved from https://www.thesundaily.my/archive/misc-

officials-under-macc-probe-over-alleged-corruption-rm109m-IUARCH530449

2. Official website MISC, Retrieved from https://www.misc.com.my/about/

3. Official website Transparency International “Corruption Perceptions Index 2019”.

Retrieved from https://www.transparency.org/country/MYS

4. World Maritime News, 06 March 2018 “Malaysia Starts Probe into Alleged Bribery at

MISC”. Retrieved from https://worldmaritimenews.com/archives/246567/malaysia-

starts-probe-into-alleged-bribery-at-misc/