Malaysian boards need to evolve more rapidly to ensure continued business viability

KUALA LUMPUR, 15 January 2025 – PwC Malaysia’s inaugural Corporate Directors Survey reveals a promising shift towards more progressive boardrooms. Most directors surveyed express confidence in executing routine governance duties, such as establishing corporate governance structures and controls (96%) and navigating policy and regulatory changes (90%), however concerns remain about agility in navigating critical emerging issues.

Directors are eager to harness the benefits of board diversity, environmental, social and governance (ESG), and generative AI (GenAI). Yet, the survey highlights a gap between awareness and effective implementation. While enthusiastic, the survey indicates that there is an opportunity for boards to transform their governance approaches to be more outward-focused and adaptable to disruptions. In a highly regulated market, a ‘check-the-box' compliance approach by boards may result in missed opportunities, significant risk exposures and, in the worst-case scenario, a substantial decline in value.

Board effectiveness

Most boards conduct board effectiveness evaluations, which are essential for ensuring that boards operate at their highest potential. However, reluctance in addressing underperformance persists. In fact, 77% of surveyed directors say there are inherent limitations to being ‘frank’ in assessments. Directors often find themselves having to maintain a delicate balance, where the desire to preserve collegiality and a positive atmosphere may overshadow the need for honest, constructive feedback.

Board composition and diversity

Half of directors surveyed (53%) agree that efforts to increase board diversity have resulted in unique perspectives, and 44% value diversity for its positive impact on board culture. However, they are less certain whether this translates to performance outcomes, with only a quarter saying that they have seen a boost in board and company performance.

Nurul A’in Abdul Latif, Executive Chair, PwC Malaysia said: ‘We are committed to shaping the reinvention of leadership at the highest levels. Based on our findings, it becomes apparent that moving beyond mere checklists and positioning board diversity as central to the strategic agenda is essential.

For example, our findings show that 44% of directors seek a stronger connection between diversity initiatives and business results. With this report, we aspire to spark essential dialogue on the behaviours and standards that leaders should embody at the apex of organisational leadership. In this new era, a diverse board composition brings to the table diverse perspectives, better equipping boards to adeptly navigate emerging challenges and build trust across an organisation.’ 

Other areas of focus: Sustainability and climate change; GenAI and cyber security  

In the area of sustainability, all survey respondents have at least discussed it once in the past year in the boardroom, but our survey suggests that some boards continue to view sustainability through a narrower lens of regulatory compliance. This is driven by the lack of visibility and control over their company’s net zero plans and the accuracy of its sustainability report. Only 27% think climate change consideration is embedded in their value creation strategy, while only 14% know how their company’s climate commitments impact capital allocation decisions. Doubts about the business case for climate actions may arise, making it difficult for companies to align sustainability initiatives with overall business strategy.

There is a noticeable lack of confidence in board’s capabilities, particularly in overseeing GenAI and cyber security risks. 75% recognise the need to invest in GenAI and have also invested in cyber security in the past 12 months, However, while the intent to invest in technology is evident, directors are not confident in their board and management’s ability to oversee and execute these initiatives. 43% say employee training and awareness needs the most improvement when it comes to cyber risk management.  

Launched at Hilton Kuala Lumpur today, the event was attended by C-suite executives, board members and senior decision-makers. Dato’ Mohammad Faiz Azmi, Executive Chairman of the Securities Commission Malaysia delivered the keynote speech. The event featured a panel discussion where panellists explored the dynamic between shareholders and stakeholders is a zero-sum game, as well as their expectations for what lies ahead as the role of modern boards enter a new era of integrated value creation.

The insights from the survey present a dual narrative: on one hand, it is encouraging to see boards stepping up to meet emerging challenges. But for businesses to remain viable over the next decade, boards must continuously assess their practices and accelerate their reinvention to stay relevant.

ENDS