KWAP’s internal guideline recommends that the tenure of an Independent Director should not exceed a cumulative term limit of nine years. Upon completion of the nine years, an Independent Director who seeks to continue serving on the Board should be re-designated as a Non-Independent Director. Other corporate governance standards such as the Malaysian Code on Corporate Governance 2021, adopt a similar term limit. This recommendation is intended to address the risk that Independent Directors who have served on a board for an extended period may have their objectivity impaired, potentially resulting in weaker corporate governance practices.

With regards to the re-election of Independent Directors exceeding a nine-year term, there is a tendency amongst the smaller and mid-cap companies to continue proposing that such directors be maintained as independent. Their argument is that the Bursa Listing rules allow a term of up to twelve years, an allowance which KWAP strongly believes is in urgent need of revision in light of recent developments in corporate governance. In 2025, we observed that there were 10 investee companies with these concerns.

Attendance of Directors & Reputation of Directors

In addition to directors’ tenure, KWAP closely evaluates other aspects of the Directors who have offered for a re-election. KWAP generally votes against the re-election of directors with poor attendance at scheduled board meetings, as KWAP views that attendance is critical to ensuring directors remain fully informed of the company’s ongoing issues.

As representatives of shareholders, directors with poor attendance may impair the governance process, potentially resulting in poor decision making and leading to both financial and reputational damage. While KWAP recognises that there may be unavoidable reasons for a director’s absence from scheduled meetings, the minimum acceptable attendance rate is set at 75% of all scheduled board meetings. Failure to meet this threshold will result in KWAP casting an AGAINST vote on the re-election of the relevant director.

Re-election of Nomination Committee Chairman

The Nomination and Remuneration Committee plays a key role in developing, maintaining, and reviewing criteria for board appointments, as well as conducting annual assessments of each Independent Director. The committee also plays a critical role in ensuring suitable candidates are appointed to senior management positions.

In line with efforts to improve gender diversity, KWAP recommends that the boards comprise at least 30% female members. Where this is not achieved, KWAP will generally vote against the re-election of the Chairman of the Nomination and Remuneration Committee.

Award of Shares to Non-Executive Directors and Ex-Gratia Payments

Long term incentive plans (LTIPs), particularly those in the form of share options, are designed to align the interests of recipients with those of the company. KWAP generally views such plans positively, as managers with equity stakes are less likely to undertake actions that could adversely affect share prices.

However, KWAP makes an exception when shares are awarded to Independent or Non-Executive Directors, as this could give rise to moral hazard. Independent Directors, who are expected to provide the necessary checks and balances, may no longer do so effectively if their focus shifts towards supporting the share price performance instead.

In addition to share awards, KWAP also views ex-gratia payments to Non-Executive Directors from a negative lens as there appears to be no strong justification have been provided to award these payments. While the amount involved may not be substantial, KWAP remains concerned that approving such payments could normalise the practice and potentially impair the independence and judgements of the Non-Executive Directors.

Share Buy-backs

The topic of share buybacks has been gaining prominence in this part of the world given the successful implementation of various upliftment programmes carried out to boost equity market performances. For example, Singapore’s Straits Times Index (STI), often viewed as a relatively subdued market, recorded a gain of 22.7% while Korea’s KOSPI recorded a strong gain of 75.6%, driven by combination of factors including share buy-backs. One of the world’s best-known investors, Warren Buffet is also a supporter of share buybacks, particularly when company is trading below its intrinsic value.

From a theoretical standpoint, a share-buyback is a corporate exercise carried out by listed companies to purchase outstanding shares from the open market using its cash reserves, thereby reducing the number of shares in circulation. This may also result in higher ownership for remaining shareholders, increased Earnings per share (EPS) and an improvement in the Return on Equity (ROEs). However, the effectiveness of such programmes depends largely on whether the repurchased shares are subsequently cancelled.

In Malaysia, many companies retain repurchased shares as treasury shares, often for use in LTIPs, which has limited the impact on share price performance. While there is no definitive right or wrong approach, KWAP believes that where the objective of a buy back programme is to return excess cash and improve capital structure, the cancellation of repurchased shares should accompany the programme. KWAP generally supports share buyback programmes that do not exceed 10% of issued and paid-up capital. In 2025, however, KWAP voted AGAINST an investee company’s share buy-back resolution, citing concerns over the company’s balance sheet following the issuance of Redeemable Convertible Preference Shares (RCPS) earlier in the year, as well as the simultaneous request for authority to issue new shares.

Issuance of New Shares

The issuance of new shares is another common resolution tabled at AGMs. KWAP is generally supportive of proposals to issue new shares, as this may allow companies to raise capital for various purposes, such as investments into new verticals, working capital needs as well as regulatory reasons, particularly in the case of financial institutions.

While the vote relating to share issuance is viewed from a positive lens, KWAP has a limit on the amount of new shares issued, and this threshold is below the 10% of issued and paid-up capital. Additionally, resolutions that include a waiver of pre‑emptive rights are viewed unfavorably, as they may dilute existing shareholders’ interests. Accordingly, such a resolution is generally not supported by KWAP, given its role as a long‑term investor in the company. In 2025, there were 14 investee companies that tabled such resolution in which KWAP cast an AGAINST vote.

International Voting

The year 2025 marked a new chapter in KWAP’s investment stewardship journey, as KWAP began voting at AGMs and EGMs of its top 30 international holdings, primarily in the United States, the United Kingdom, and Japan. This inaugural experience exposed KWAP to resolutions that are less common in the Malaysian context, including the elimination of supermajority requirements (Tesla), authorisation of political donations (Compass Group), and proposals for reporting on AI data‑sourcing risks (Microsoft Corporation). KWAP believes these differences reflect the relatively nascent stage of investor stewardship in Malaysia. Going forward, KWAP aims to share lessons learned with domestic investee companies to further elevate local corporate governance standards.

Conclusion

In conclusion, although most of the resolutions that KWAP voted AGAINST were ultimately carried, KWAP will continue to play an active role in upholding strong corporate governance standards and promoting effective investor stewardship, in line with its role as a key institutional investor in Malaysia and its organisational DNA.

KWAP firmly believes that robust corporate governance is fundamental to achieving sustainable long‑term financial returns. As the 2026 domestic AGM season approaches, KWAP remains hopeful that the progress made in investment stewardship will be sustained, and that further collaborative initiatives with positive impact will continue to emerge.