2.3 Governance whereby companies disclose not with

2.3 Mandatory vs. voluntary corporate Governance Disclosure

 Although the
regulators in Malaysia have created a commendable framework for Corporate
Governance, Malaysian corporations still have not achieved a satisfactory level
of corporate governance practice. This is evident from a joint survey conducted
by the investment bank Credit Lyonnais Securities Asia (CLSA and Asian
Corporate Governance Association in 2003 in which the country was ranked number
one (score of 9 out of 10) in terms of rules and regulation but only managed to
obtain an average score of 5.5 out of 10 for overall corporate governance
practice. In fact, many of the rules in the codes are only recommendations and
there is much scepticism that best-practise recommendation and/or
principle-based approaches are effective substitutes for more rule-based
approaches, such as the United States Sarbanes-Oxiey Act (Pension Investment
Research Consultant, 1998). Hence, this raises the question on whether
corporate governance disclosure Should be made  mandatory instead of voluntary

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Nevertheless, it should be noted that Corporate Governance
at its core. is about interaction of human beings-the relationships in a
boardroom, or the ability of a non-executive to stand up to a dominant chief executive.
Thus, making corporate governance disclosure mandatory may hamper the spirit or
the very objective of Corporate Governance whereby companies disclose not with
the aim to strengthen Corporate Governance but more as compliance effort
(Minority Shareholders Watchdog Group, 2005)

There have been evidences suggesting that companies who
opted for voluntary disclosure deemed to have gained more benefit compared to
those who disclosed in adherence to mandatory requirement. In light of the
above argument, one could arrive at an assumption that in order to promote
voluntary disclosure of corporate governance practice, companies should be made
aware of the benefits they could attain especially in terms of higher corporate
performance. Although it has been accepted as a rule of thumb that better
corporate governance practices leads to higher corporate performance, empirical
researches have shown contradicting results. Consequently, a clear link between
corporate governance and financial performance could not be established.