- 7 weeks ago
From the 1MDB scandal to the recent revelation that over 430 independent directors in Malaysia have served on the same boards for more than 12 years –it’s time to address the cracks in Malaysia’s governance structures.
The newly released FIDE Forum Board Culture & Leadership 2025 Report exposes a critical truth: compliance alone won’t prevent the next
crisis. It’s time to move beyond checklists and confront the unspoken dynamics shaping our financial institutions — groupthink, power imbalances, and over-reliance on regulators.
Tay Kay Luan, CEO of FIDE FORUM joins NIAGA SPOTLIGHT to discuss how Malaysian boards must lead with integrity, refresh their ranks, and reclaim accountability.
The newly released FIDE Forum Board Culture & Leadership 2025 Report exposes a critical truth: compliance alone won’t prevent the next
crisis. It’s time to move beyond checklists and confront the unspoken dynamics shaping our financial institutions — groupthink, power imbalances, and over-reliance on regulators.
Tay Kay Luan, CEO of FIDE FORUM joins NIAGA SPOTLIGHT to discuss how Malaysian boards must lead with integrity, refresh their ranks, and reclaim accountability.
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NewsTranscript
00:00Hello and welcome to Nyaga Spotlight with me, Tamina Kaosji.
00:11Nyaga Spotlight takes us through the week in economic analysis and future affairs.
00:15Now today on future affairs, our spotlight is on building ethical board cultures by moving beyond compliance.
00:22Now the forces shaping Malaysia's financial future reside in the boardrooms of our banks, financial institutions and etc.
00:30And when boards falter, the consequences ripple far beyond balance sheets.
00:35From global scandals like 1MDB to the recent findings that over 430 independent directors have sat on the same boards for more than 12 years.
00:43Public trust is on the line.
00:46A new report by the FIDE Forum reveals a stark truth.
00:50Compliance checklists alone don't prevent failure.
00:54Culture, courage and accountability inside the boardroom do.
00:58So how do we move from groupthink to bold ethical leadership?
01:03And who should truly set the so-called tone at the top?
01:07Well, joining me this morning, FIDE Forum CEO, Tay K. Luan,
01:11to explore how we rebuild financial governance via ethical board culture.
01:16A very good morning, Mr. Tay. How are you today?
01:18Good morning.
01:18Good morning. I'm well. Thanks for having me here.
01:22Fantastic. So, Mr. Tay, let's get into the nitty-gritty.
01:26Sure.
01:26Now, tell me a little bit about your study, which also interviewed and surveyed board directors across Malaysia's licensed financial institutions.
01:35What was the thinking around actually having this particular study come out at this very crucial and critical moment in time in 2025?
01:44Okay. Okay. Thank you.
01:46Thank you. I want to take it back to the time when we produced the Board Effectiveness Guidebook.
01:56That was in 2016, sometime back.
01:59Since then, working with our industry members, we realised that the importance of board culture.
02:10And board culture typically means the way things happen, the way things are carried out, the way things are communicated, and also the informal and intangible practices that we feel and we experience on the day-to-day at the board level.
02:31So, all these encompass the entire thing called board culture.
02:35We thought that a year ago, it would be good to take stock of such an important element that defines and even make an important differences to the outcome of the board performance.
02:59Absolutely. Now, would you say there was perhaps a single most surprising or revealing sort of a finding around cultural norms, which you actually uncovered via this study and the report?
03:13Okay. We discovered more than one surprise. So, I thought then we worked closely with our partners, the Asian Business School, where we reside anyway.
03:28We then categorised a lot of these discoveries into four main categories.
03:35Right.
03:36And we thought it would be good to segment these categories so that we can then do a much informed follow-through as well as analysis.
03:50So, these are being the dynamics, which is how things work out this way, how things don't work out, how do other people get things moving in a sense.
04:02Then we look at the behaviours, which is the difficult part because there's no one set of behaviours that define what board members should be.
04:11Leadership, of course, stands out as an important element here.
04:15Here, we talk about two levels. One, we talk about the board leadership, which is usually referred to the chairman.
04:23And this is the steward of the chair of the entire board.
04:28Yes, the chair. And of course, the externalities involving external influences from customers to regulators.
04:37Those are, you know, great influences on how the board performs.
04:44So, putting all this together, the report gave a very refreshing look at it.
04:51And if one wants to take the report on its own, I think there's a lot of lessons that one can draw out to go into a developmental perspective,
05:03the education perspective, and even for future hiring to make up an excellent composition of the board.
05:13Not just for the financial institution, but also for the other industries.
05:20Yes, absolutely. So, Mr. Tay, getting deeper into it now.
05:24So, your report also warns that cohesiveness, however, may not necessarily mean a good thing because it could actually lead to groupthink.
05:32Yes. And in your opinion, then, what sort of practical early warning indicators could be put into place to avoid this risk,
05:40particularly given the fact that Malaysia is also falling under the category of a high power distance culture.
05:47Yes, yes.
05:47Where cohesiveness may actually just mean the social pressures of having to conform to what the chair or other leadership figures are moving towards.
05:57Okay. So, you have cleverly constructed your questions into three main parts.
06:07One is you mentioned the power distance culture.
06:14Then you mentioned the cohesiveness.
06:17And then, thirdly, you asked about how, whether or not, a bit of both, or how do you balance these two?
06:26So, I will go back to the leadership that I mentioned just now.
06:30Sure.
06:30Now, the leadership being the steward of this board here plays an important role.
06:38So, he or she would have to do the balancing act, ensuring that a balance between cohesiveness versus a very troubled, riddle organization.
06:58So, what the report comes out shows that there are a few things.
07:06Consensus building is important, as well as, you know, the need to produce the balance between the coherence and allowing the opposite views of things to be heard and so on.
07:23So, one of the things that we look for is not to allow the group thing to be the dominant element where opposite views are being kept aside and not allowed.
07:43And so, there is a balance of views and I think the report shows very clearly that things are changing.
07:53The views of diverse views, of views that are opposite of what the consensus would be, are being heard but not necessarily oppressed.
08:08And that's very, very healthy in a sense.
08:10Yes, exactly.
08:11There is a clear need to be able to build a sort of infrastructure that is able to identify whether healthy consensus is muting dissent.
08:22Now, there are some mechanisms in place already.
08:24I refer to the fact that, for example, the Dutch Central Bank, where literally there are observers who are present during board meetings,
08:33who read all the way signals from body language to the actual physical language that is used.
08:39So, moving along, let's ask about looking at distinguishing between demographic diversity versus cognitive diversity.
08:49Now, that's another very interesting area, right?
08:51Yes.
08:51Because the quickest way for an LFI, the licensed financial institutions, to upgrade cognitive diversity in, let's say, the time of a year.
09:03What would be the recommendations?
09:05Okay.
09:08Board members are continuously being reminded to upgrade themselves.
09:14You know, what gets them here may not get them to the places that they want to be.
09:23So, that's important.
09:24And we do have courses that are being organized, both technical and non-technical, you know, for members to upgrade, to enjoy the networking opportunity,
09:41to learn from each other, as well as, you know, bringing forward both the technical and non-technical.
09:49So, here, I want to re-emphasize the importance of cognitive diversity.
09:56Sure.
09:56Why is that so?
09:57I think people think very differently among everyone.
10:02And we all got different style of doing things.
10:07And cognitive is an important element here.
10:10And we allowed, you know, I think the emphasis from the report shows that, well, gender diversity is being recognized.
10:20That's right.
10:20And, you know, it's been accepted as well, as well as the ethnicity and age.
10:25But what is important is the functional diversity that brings into the board,
10:32which means that one could bring in the whole lot of experiences in a particular industry as opposed to the industry that is served.
10:46And then there's functional diversity, which includes things like compliances,
10:50the understanding of the different rules, different policies.
10:54Correct.
10:54From money laundering.
10:55Correct.
10:56Exactly.
10:56So, we're actually talking about non-demographic lenses, such as technical expertise, etc.,
11:02which does not necessarily become represented only if, let's say, you have gender diversity in the board.
11:09So, that cognitive sort of diversity, Mr. Tay,
11:12how would you best recommend that our LFIs look towards cultivating that?
11:18Okay.
11:18So, in a typical board, you have a diverse composition.
11:26So, you've got people from the accounting and finance background.
11:29That's right.
11:30You've got people from the legal background.
11:32You may have people from the industry background, which also includes the information technology.
11:37The challenge is for each one of them to be able to leverage their strengths and put together, you know, their views so that they can then draw on and lead to a consensus among them
11:53and to a conclusion that is worthwhile for them to take it forward.
12:00You know, but there are commonalities among all of them, commonalities that include things that the ethical component part of it, that's important.
12:11The accountability is another one.
12:14You know, that part of it is embedded in each one of their roles and responsibilities.
12:20The third one is, seriously, they need to understand the big picture, which means that they need to bring together the external developments that's going on.
12:33Regional markets, maybe.
12:34Regional markets.
12:35Technological risks.
12:36Yes, absolutely.
12:36And then you've got the impact of the artificial intelligence.
12:42You've got, you know, cyber security.
12:45And importantly, you also need to look at what matters to public interest.
12:50So what I'm actually hearing is that, for example, particularly looking at the general composition of Malaysian boards,
12:56we're not saying that you need to in any way discriminate in an age-like manner.
13:02But for those who are older members, they definitely need constant refreshing when it comes to tech risk, etc.
13:08For younger members who may be more aware and up-to-date for tech risk, maybe a broader, more in-depth perspective about things like regional markets.
13:17Very interesting discussion in so far, Mr. Tay.
13:20Thank you so much for the conversation.
13:22We do take a brief break and a breather right now, though.
13:25Don't go anywhere.
13:26We'll be right here with Nyaga Spotlight in just a minute.
13:28Welcome back to Nyaga Spotlight.
13:51Still with me, Tamina Koushi.
13:52And today, of course, the focus is on building ethical board cultures by moving beyond compliance.
13:58We're Tay Kwe, Luan, CEO of FIDE Forum, in the studios with me.
14:02Mr. Tay, so now digging a little bit deeper into that power distance question.
14:07So the high power distance and low assertiveness, which is a commonality in Malaysian and many other Southeast and South Asian cultures,
14:16it also makes effective conflict quite hard to surface.
14:21So from FIDE's side, what would your playbook look like ideally for chairpersons to actually facilitate an atmosphere
14:30where there is psychological safety and the ability to voice dissenting opinion in a constructive manner?
14:40First and foremost, we need to recognize that we are Asians.
14:49So Asians typically have got three very common features.
14:55One is that you don't question your superiors, elderly and the authorities.
15:02Second, you know, rebelling and, you know, conflict usually are, you know, are not encouraged.
15:14They're negatively viewed.
15:15Yeah.
15:16You need to turn it around to have a little bit more subtle and so on.
15:21And the third one, I think we, the need to question every single thing is always, you know, defined as negative.
15:34And even from our school days, questioning teachers is not seen as insubordinate.
15:41Yeah.
15:42It's not seen as something that highly, unlike in the Western education where you do, if you take the Scandinavians, you know.
15:50You're encouraged.
15:51You're encouraged to question.
15:53But things are slowly but surely changing.
15:56However, the high power distance culture is still very much being seen.
16:06But we also recognize that from time to time, there are already elements of individuals willing to questions and willing to constructively.
16:20I'm not talking about question for the sake of it.
16:23That's right.
16:23And that's not the same as deferring and actually disrespecting the hierarchy.
16:30So perhaps what I can imagine, actually, is as part of the annual board evaluation, perhaps even a sort of a challenge rating index could be introduced.
16:41Yes.
16:42Which might track who is challenged, by whom, and what is the outcome.
16:47Because that would be most helpful in informing us.
16:50Moving the discussion along, Mr. Thay, now your report also notes that regulators can become the tone above the top, which may intentionally also then stifle innovation.
17:01So where do you think that line ought to be today in 2025?
17:05And how can boards then rebalance accountability?
17:08Earlier on, I mentioned that external influence is one of the elements shaping the board culture.
17:19This is where we talk about tone above the top.
17:23Tone above the top means, you know, the regulators being the godfather of the whole system needs to provide a broad framework.
17:34They have every reason to do so, because absence of this means chaos.
17:39So every one of us have to work within rules.
17:43How far the rules being put in place, you know, it depends on the level of maturity in our society.
17:54Malaysia is not that bad.
17:55I will assure you that the regulators over the past decades have put in place a structure that is balancing between the commercial interest versus the public interest.
18:13Right.
18:13I think you've seen that.
18:14So I won't go deep into that.
18:16The important thing is that the industries know very well that there are rules for ethical practices to avoid any form of unethical behaviours.
18:31And more importantly, lessons learned from the past banking crisis and bank failures have taught the industry lessons that we need to balance between, you know, the various forces.
18:50Would you recommend perhaps at this point in time, 2025, of course, has also been an unprecedented year, almost akin to what we experienced maybe in 2001 related to financial markets.
19:01Would you say that it may be important at this point in time for all Malaysian boards to have a sort of a standing emerging risks and ethics session built into every board meeting?
19:14So risk management includes the need to manage the uncertainty, the unexpected circumstances that comes in, you know,
19:25and even the changes in the political and social forces that can shape the way we work.
19:34Importantly, what is happening in the industry here?
19:38And as the report deduces, while the board recognises there is the need to rules, they also recognises that innovations and allowing them to suggest and also to put in place a different way of doing things is also encouraged.
20:00So there is an industry or financial playbook for industries to test out their ideas, their innovations, to see how it works and so on.
20:16To be candid about it, I think the industry has been encouraged by the regulators to be more innovative
20:26than just relying on rules and regulations while we know that there are certain things.
20:38It has to be balanced against the need to ensure that customers access, flexibility is one, adaptability is another one,
20:49and also allowing a certain room of behaviours that encourage the industry to respond to, you know, to uncertainties and so on.
21:04So these are all evidence of that.
21:06Exactly. So speaking of, you know, behaviours and tracking them, would you perhaps recommend this kind of interactive mapping during sessions?
21:15And let's say if an average Malaysian LFI board, if they were to track this behaviour across maybe three meetings,
21:24what type of insights and outcomes does FIDE predict we might anticipate,
21:30given the deep work that you've done working closely and speaking with boards around the country?
21:34OK, it's already happening.
21:36You know, we see smaller committees emerging in industry, allowing a greater flow of discussion among themselves.
21:47Diversity within the group, not just the gender.
21:51Cognitive as well.
21:52And allowing the cognitive as well.
21:53Age demographics perhaps, hopefully.
21:55Well, we have the young and old, you know, mixing together and all learning from each other.
22:00You'll be surprised that even within the gender, we found in the survey that the women directors are more willing to questions,
22:14more willing to debate in a healthy way.
22:18Which tracks, of course, for the global outcomes, right?
22:20Yes, so in a healthy way.
22:22So the other thing is that the board dynamics, within the board effectiveness,
22:26every single member of the board is encouraged to speak up for the wrong or right reasons,
22:37you know, so that they can then draw into a consensus.
22:40And one of the competencies that we've always told new and old board members is that they must be able to ask the right questions.
22:49If they don't ask the right questions, then, you know, they get themselves into, you know, into trouble, you know.
22:56So what are the things that they need to do is to, sorry, they need to be able to keep up to date.
23:03Yes, exactly.
23:04Now, speaking about keeping up to date and such like, let's also look then, Mr. Tay,
23:09at how we can have potential governance guardrails so that every chair is able to adopt them in order to ensure that camaraderie
23:22or a good working relationship doesn't necessarily become a sort of a confirmation bias scenario.
23:29Because this is quite critical, particularly in smaller boards, as you said,
23:33where you may have all the great checkpoints, but at the same time, you want to ensure that it stays at a healthy level.
23:41Yes, so absolutely.
23:42So you don't want to encourage the old boys network, you know, where three men together form a committee
23:50and they come from the same schools and so on and so forth.
23:53And they speak the same language, they go to the same restaurants, you know, and so on and so forth.
23:57You can't, we can't stop that from happening.
24:00But increasingly, the report has shown very clearly that each and every individual, you know, exercise professionalism.
24:10That's right.
24:10And this comes about from the exposure and also, I think, the encouragement from the external stakeholders
24:20that they will need to exercise with care, you know, towards their decision-making process.
24:27So in order to do so, in any of their deliberations, to be honest, many of them would have to ask the right intelligent questions, you know.
24:40To prop that response as well.
24:42Yes.
24:42And these are all minute, you know, by the way.
24:45Absolutely.
24:46The documentation process is very rigorous.
24:50No one can escape from this process.
24:53And so, if you choose to sit in a board to perform your fiduciary duties,
25:02you need to make sure that you exercise with care your contribution that makes sense towards the final decision.
25:15But it is not encouraged that you remain silent all the while, because then in any of the session meetings,
25:26you then find yourself, you know, in the outlier.
25:32Exactly.
25:32And that is not healthy, in a sense.
25:35And in a sense, also, the data is showing that directors are often the ones who are defaulting to consensus,
25:42and they're usually relying on the chair to manage any so-called difficult personalities who have some sort of high social capital.
25:50Okay.
25:50So that might lead to, if you don't voice your concerns appropriately, you may be in a position where you're completely silenced.
25:58So there needs to be that sort of a very rigorous feedback mechanism.
26:03In closing, Mr. Tay, would you perhaps maybe recommend within a year,
26:09what would be the biggest outcome that you would like to see now that the FIDE Forum report is out?
26:16Okay.
26:16I, well, I'd like to see the inclusion of technology in this process.
26:26Yes, we've come to a stage where the use of artificial intelligence would help to cut down the level of biasness and so on and so forth.
26:38Of course, I mean, it is artificial intelligence.
26:41So you do need to train your LLMs.
26:42We need to train people.
26:43And what we should be looking at is to narrow down our prediction to the level of accuracy in the way we manage this process.
26:58And so it is not impossible.
27:00The technology is out there now.
27:01So a few things, the use of technologies to continuously build and strengthen the board room.
27:11And that includes the process of the way they carry out their duties.
27:18Thirdly, it can also help to identify future board members.
27:22You know, some will retire, but they need to look into the future types of people that need to bring on board.
27:30And lastly, you know, the technology continues to evolve.
27:35And it is vital that industry spend some time in order to be efficient and effective in the way they deploy these resources to lead the industries.
27:49So that for greater goods and so on.
27:52Absolutely.
27:52Mr. Day, thank you so much for the most insightful conversation.
27:56And strong boards clearly build strong markets.
27:59We've heard the message clearly.
28:00Refresh leadership, confront behaviours that may be contributing to bias and also own culture.
28:07Don't outsource it just to the regulators.
28:09Governance is not a box to tick.
28:11It's the backbone of trust.
28:12And the time for boards to step up is now.
28:14I'm Tamina Kowski signing off for now.
28:16Here's to a productive week ahead.
28:18Thank you very much.
28:19Thank you, Tamina.
28:20You didn't do that.
28:21No.
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