THERE is no doubting that the new board of Felda Global Ventures Bhd (FGV) wants best for shareholders of one of the world’s largest plantation company.
An air of respectability and confidence has set in as respected economist, Tan Sri Dr Sulaiman Mahbob, is appointed as the acting chairman. When Sulaiman says that his objective is to improve the business and take a quantum leap into ensuring higher standards of governance structures be put in place, nobody doubts his sincerity.
However, even with all the governance structures that is already in place and additional measures that are being planned, would there be whistleblowers in FGV?
Highly unlikely if one were to look at how things are panning out for the suspended president and chief executive officer Datuk Zakaria Arshad.
Zakaria is now facing disciplinary action for allowing a company operating in Afghanistan but based in Dubai a bigger credit line than beyond his authority of approval. The amount in question is US$11.5mil and the external auditors have raised the red flag on its recoverability.
FGV’s receivables are to the tune of RM1.76bil as at end December 2016. By the scale of its business, a sum of US$11.5mil or RM45.45mil is small.
Nevertheless, if one were to follow strictly the code of governance, any action, however small in terms of value, if done to the detriment of shareholders, should be looked into. It applies to all – from the most junior to senior member of management.
However, the gravity of the punishment meted out, if it warrants one, should be considered together with the circumstances of the events leading to the case being publicly exposed.
Zakaria’s case only came to light because he was fighting a political heavyweight who held an influential post in FGV. Zakaria was up against FGV’s former chairman, Tan Sri Mohd Isa Samad.
Isa was appointed as chairman of Felda in 2011 and led its listing. A politician, Isa had an overwhelming influence in Felda, FGV and other companies by virtue of being the chairman. Until early this year, he was the chairman of FGV, its parent company, the Federal Land and Development Authority (Felda), Felda Investment Corp and many other subsidiaries.
In fact, one of the reasons why the Employees Provident Fund (EPF), a stickler for corporate governance, disposed of its interest in FGV is because there was no separation of powers between the board and the major shareholders.
The provident fund, for instance, felt that the total remuneration package for the chairman, which was stated at RM2.67mil in the 2016 annual report, was seen as too high.
The powerful provident fund expressed its dissatisfaction on the way FGV was managed by disposing its shares. In fact EPF’s chief executive officer Datuk Shahril Ridza Ridzuan hardly completed a year as a board member of FGV.
Zakaria’s fight for survival was not easy to start with. If a fund such as the EPF could only express its unhappiness by merely disposing of the shares at a lost, what chance an employee such as Zakaria stood against the top brass of FGV?
He was facing the chairman and a board that was rather quiet. Zakaria’s contention was that he did not agree to two proposals being considered by the board and did not approve on some spending by the chairman.
Zakaria spilled the beans in public on matters that the major shareholders and key stakeholders such as the government was probably aware of but did not want to act on.
Only now, after Isa has been moved out of FGV does the board admit that the company lacked governance. Its performance has much to improve and acquisitions done in the past have not performed up to expectations.
Why were the independent board members so silent on such matters earlier? Why were the government representatives not raising the red flag on these earlier?
FGV had RM5.03bil in its kitty as at the end of December 2013, much of it came from the proceeds of its listing. It paid RM1.2bil for Pontian Plantations in 2013, RM568mil for UK-listed Asia Plantations Ltd in 2014 and RM655mil for Golden Land plantations in 2015.
FGV also forked our RM2.2bil to Koperasi Permodalan Felda for a 51% stake in Felda Holdings Bhd in a deal concluded in 2013.
Among the plantations, only Pontian Plantations is performing up to expectations. The other acquisitions – Asia Plantations and Golden Land plantations – have not performed up to the mark.
One wonders if the discussion on FGV, its governance and quality of acquisitions would have come about if Zakaria had opted to keep quiet and leave the plantation group when under pressure?
Zakaria decided to speak out in the open when faced with the brunt. He started to spill the beans on unhealthy corporate practices of the plantation company when he faced the axe.
This has not gone down well with some quarters as it is seen be not conforming to the norms, which is not to wash dirty linen in public.
There is a view that Zakaria should have spoken out in public much earlier and not when he faced the axe.
However, if one considers the situation a year ago, Zakaria probably would not have stood any chance had he spoken up earlier. There was no indication that the government was prepared to make changes to improve the governance in Felda and FGV.
The first sign only came in January this year when Tan Sri Shahrir Samad was appointed as chairman of Felda, the major shareholder of FGV. It was to separate the major shareholder and the listed company.
Zakaria could have walked away quietly when he was told to leave FGV. And probably nothing would have changed in the listed company.
He decided to voice out the misgivings about the way the company was managed. This triggered a series of events and has brought about changes in FGV.
He should not be penalised for speaking out. Because this would render redundant all the governance structures and whistle blowing channels that are in place in FGV.