Ethical Practice Disclosure of Malaysian Public Listed Companies
Abstract
The Malaysian business world has seen a series of scandals amongst government-related companies in recent years, including 1Malaysia Development Berhad (1MDB), Lembaga Tabung Haji (LTH), Felda Global Ventures (FGV) and Khazanah Nasional Berhad (KHAZANAH). Despite having strong corporate governance policies, in addition to the Malaysia Code of Corporate Governance (MCCG), unethical practices and a lack of transparency remain a problem. This paper examines the level of disclosure of ethical practices by Malaysian public listed companies. Ethical practice disclosure is measured using the modified Ethical Commitment Index (ECI) with six themes derived from the literature: corporate ethical values; action to promote ethics; whistle-blowing policy; code of ethics; sustainability practices; and ethics committee. Conducting analysis of the annual reports of 1,115 companies across five years (2012-2016), this study found there is a need to improve several aspects of ethical practice disclosure. Although the findings suggest 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, supplementary practices (such as disciplinary action, programmes to support a code of ethics, whistle-blowers’ protection, and establishing an ethics committee) are still weak. This study suggests that regulator action is required to improve the level of ethical practice disclosure by Malaysian public listed companies.
References
[1] Abidin, A. F. Z., Hashim, H. A., & Ariff, A. M. (2017). Ethical Commitments and Financial Performance: Evidence from Publicly Listed Companies in Malaysia. Asian Academy of Management Journal, 22(2), 53–95.
[2] Ali Khan, M. N. A. (2015). Internet Financial Reporting in Malaysia: Preparers' and Users' Perceptions. Procedia - Social and Behavioral Sciences, 172, 778–785.
[3] Arik, T., Kaptein, M., & Karrsing, E. (2018). Ethics Committees (Including Research). In Encyclopedia of Business and Professional Ethics. Springer International Publishing AG.
[4] Asian Development Bank. (2014). Asean Corporate Governance Scorecard Country Reports And Assessments 2014.
[5] Berrone, P., Surroca, J., & Tribo, J. A. (2007). Corporate Ethical Identity as a Determinant of Firm Performance: A Test of the Mediating Role of Stakeholder Satisfaction. Journal of Business Ethics, 76, 35–53.
[6] Bezares, F. G., Przychodzen, W., & Przychodzen, J. (2016). Bridging the gap: How sustainable development can help companies create shareholder value and improve financial performance. Business Ethics: A European Review, 26, 1–17.
[7] Brenner, S. N. (1992). Ethics Programs and their Dimensions. Journal of Business Ethics, 11, 391–399.
[8] Callaghan, M., Wood, G., & Svensson, G. (2008). A longitudinal study of the commitment to business ethics of corporate Australia. International Journal of Entrepreneurship and Small Business, 6(1), 173–184.
[9] Ching, H. Y., Gerab, F., & Toste, T. H. (2014). Scoring Sustainability Reports using GRI indicators: A Study based on ISE and FTSE4Good Price Indexes. Journal of Management Research, 6(3), 27.
[10] Choi, T. H., & Jung, J. (2008). Ethical Commitment, Financial Performance, and Valuation: An Empirical Investigation of Korean Companies. Journal of Business Ethics, 81, 447–463.
[11] Craft, J. L. (2018). Common Thread: The Impact of Mission on Ethical Business Culture. A Case Study. Journal of Business Ethics, 149(1), 127–145.
[12] Dhamija, S. (2014). Whistleblower Policy — Time to Make It Mandatory. Global Business Review, 15(4), 833–846.
[13] Donker, H., Poff, D., & Zahir, S. (2008). Corporate values, codes of ethics, and firm performance: A look at the Canadian context. Journal of Business Ethics, 82(3), 527–537.
[14] Driskill, G., Chatham-Carpenter, A., & Mcintyre, K. (2019). The Power of a Mission: Transformations of a Department Culture through Social Constructionist Principles. Innovative Higher Education, 44, 69–83.
[15] Ebrahim, G., & Ahmadi, S. A. A. (2012). The Study of Relationship between Professional Ethics and Personnel's Organizational Commitment of Bu Ali Sina Petro Chemistry Company. Interdisciplinary Journal of Contemporary Research in Business, 3(10), 771–787.
[16] Eger, C., Miller, G., & Scarles, C. (2019). Corporate Philanthropy Through the Lens of Ethical Subjectivity. Journal of Business Ethics, 156(1), 141–153.
[17] Ferrell, O. C., Fraedrich, J., & Ferrell, L. (2011). Business Ethics: Ethical Decision Making and Cases (8th ed.). South-Western, Cengage Learning.
[18] Garegnani, G. M., Merlotti, E. P., & Russo, A. (2015). Scoring Firms' Codes of Ethics: An Explorative Study of Quality Drivers. Journal of Business Ethics, 126(4), 541–557.
[19] Graves, S. B., & Waddock, S. (1994). Institutional Owners and Corporate Social Performance. The Academy of Management Journal, 37, 1034–1046.
[20] Ho, P. L., & Taylor, G. (2013). Corporate governance and different types of voluntary disclosure: Evidence from Malaysian listed firms. Pacific Accounting Review, 25(1), 4–29.