Are Pre IPO Companies Under Prepared for Corporate Governance?

Despite the Malaysian Code on Corporate Governance encouraging non-listed companies to adopt its practices voluntarily, many companies seeking listing are still under-prepared in their governance systems.  For examples:

• Most board members are only constituted in a short period and are not subject to strict “fit and proper” tests during their nomination process; 
• Board is potentially entrenched with a minimum number of independent directors in its composition;
• The formations of various board committees are done with the stroke of a pen with minimal consideration of the ideal capacity and the size of the Board to function effectively;
• The governance, risk, anti-corruption, whistleblowing, sustainability policies etc. are displayed on their websites though many of these policies have not been operationalised;
• Material sustainability matters and their impacts are not assessed and clarified vis-à-vis present business environment and performance; and
• The CEO and CFO, the key officers for ensuring the adequacy and effectiveness of the risk management and internal control systems, are not providing their assurance in the prospectus.

The stakeholders’ concern is, would companies that pay lip service to their governance system will be able to cope with or willing to invest in stronger governance systems truthfully after listing?  If they would not, should Pre-IPO companies beef up their governance system first before going on board?