Ethical Practice Disclosure of Malaysian Public Listed Companies

Abstract

The Malaysian corporate environment has been shocked by corporate scandals and poor performance among government-related companies, such as 1Malaysia Development Berhad (1MDB), Lembaga Tabung Haji (LTH), Felda Global Ventures (FGV) and Khazanah Nasional Berhad (KHAZANAH). Despite having strong corporate governance and being strengthened through Malaysia Code of Corporate Governance (MCCG), unethical practices and a lack of transparency remain a problem among Malaysian companies. The purpose of this paper is to examine the level of disclosure of ethical practices among Malaysian public listed companies. Ethical practice disclosure is measured using the modified Ethical Commitment Index (ECI) with six themes derived from the literature; notably, corporate ethical values, action to promote ethics, whistle-blowing policy, code of ethics, sustainability practices, and ethics committee. Through content analysis of the annual reports of 1,115 companies and five years’ observation (2012-2016), this study found there is a need to improve several aspects of ethical practice disclosure. The findings implied that companies supported the MCCG, with most of the companies complying with the recommendations of MCCG 2012 to uphold a high standard of ethical practice. However, supplementary practices, such as disciplinary action, programmes to support a code of ethics, whistle-blowers’ protection, and establishing an ethics committee, are still weak. The findings indicate that the level of ethical practice disclosure among Malaysian public listed companies remains low and raises concern that requires action by regulators. This paper contributes by providing insights into the disclosure of ethical practice among Malaysian public companies.

Factors Influencing Corporate Ethical Values Disclosures: A Systematic Literature Review

“…The scenario above reflects that complying with corporate ethical conduct for disclosures among Malaysian companies is still a problem. This finding is consistent with the National Anti-Corruption Plan 2019-2023 or NACP on the lack of control and transparency in corporate governance (Abidin et al, 2019). This gives rise to why there is still low awareness of the importance of ethical practices disclosures among companies.…”

“…Under ethical commitment, past studies have identified six sub-categories: corporate ethical values, action to promote ethics, whistleblowing policy, code of ethics disclosure, corporate commitment towards sustainability, and the availability of the Ethics Committee (Rahman et al, 2016;Abidin et al, 2017Abidin et al, , 2020Abidin et al, 2019;Salin et al, 2019;Hashim et al, 2020).…”

“…To develop a relevant systematic review, this paper was guided by the primary research objective identifying research patterns on factors influencing the communication of Malaysian companies' ethical values from 2001 to 2021 (since the inception of the Malaysian Codes on Corporate Governance and before the MCCG 2021). This study focuses mainly on ethical value communication because disclosure is still lacking (Abidin et al, 2019).…”

“…Despite the significant initiatives executed by the regulators in strengthening corporate governance, unethical practices remain unsolved (Abidin et. al., 2019).…”

“…The formal channel includes a code of ethics, employees training, and seminars. On the other hand, the informal channel comprises corporate culture, leadership, and management behaviour (Abidin et al, 2019). However, the availability of two communication channels and organisation communication through formal channels have failed to indicate many essential aspects of communication.…”