Independent directors in Malaysian corporate governance: out with the old?

This article explores whether and how corporate ‘law in books’ on independent director requirements may be converging on regional or global standards even ‘in action’, focusing on Malaysia. These requirements have proliferated across economies in Asia, at least partially adapting to the reality of more government-linked and/or family-controlled listed companies than (traditionally) in the United Kingdom and the United States – albeit still with some interesting variations. Given such shareholder concentration and its related wider political economy, Malaysia seems an unlikely environment for independent director requirements to take root. Nonetheless, particularly after the Asian Financial Crisis, Malaysia has gradually intensified a three-level regulatory approach with parallels in Thailand and elsewhere – mobilizing mandatory, ‘comply or explain’ (recommended) and purely voluntary norms to promote independent directors. The most intriguing and comparatively rare development has been to recommend limits on long-serving directors, including a two-tiered voting procedure, later supplemented by mandatory tenure limits. The quantitative impact on boards has already been significant, intersecting with changes to gender composition for directors. This opens the possibility that sustained micro-level reforms can have significant impact despite an unpromising macro-level political economy for transformations in corporate governance.