Malaysia's low GINI score
|Nov 10, 2011|
"This index measures the degree of inequality in the distribution of family income in a country. The index is calculated from the Lorenz curve, in which cumulative family income is plotted against the number of families arranged from the poorest to the richest. The index is the ratio of (a) the area between a country's Lorenz curve and the 45 degree helping line to (b) the entire triangular area under the 45 degree line. The more nearly equal a country's income distribution, the closer its Lorenz curve to the 45 degree line and the lower its Gini index, e.g., a Scandinavian country with an index of 25. The more unequal a country's income distribution, the farther its Lorenz curve from the 45 degree line and the higher its Gini index, e.g., a Sub-Saharan country with an index of 50. If income were distributed with perfect equality, the Lorenz curve would coincide with the 45 degree line and the index would be zero; if income were distributed with perfect inequality, the Lorenz curve would coincide with the horizontal axis and the right vertical axis and the index would be 100."
Malaysia should really do much better than this, being in the bottom quarter.
The relevance to Corporate Governance (CG): if companies in Malaysia scored better on CG issues, then minority shareholders would have gained a lot in the longterm. The authorities and large influential institutions like EPF, PNB and Khazanah should have actively pursued CG issues in the last decades and should have punished companies and its directors that behaved badly. Minority shareholders would have been better off and Malaysia's reputation would have been much better. Some improvements have been made in the last few years, but much more has to be done.