Too often corporate governance takes a back seat in our GLCs


Corporate governance: May the Felda and FGV debacles serve as the ultimate lesson that politicians and their cronies are not welcome on the boards of our GLCs at all. — Reuters

Corporate governance: May the Felda and FGV debacles serve as the ultimate lesson that politicians and their cronies are not welcome on the boards of our GLCs at all. — Reuters

A year has lapsed since the Pakatan Harapan (PH) coalition created history by ditching the incumbent Barisan Nasional government for the very first time in 61 years.

May 10, 2018 was the day Malaysians can never forget. It was the dawn of a new hope – a new aspiration that Malaysia will once again be the country that we can be proud of.

On the corporate governance front, we welcome the PH government’s commitment with open arms to enhance the standards of corporate governance (CG) among our government-linked companies (GLCs).

In fact, the government of the day must ensure that all GLCs strive to strengthen their respective governance process without any interference.

One important CG issue that has often been compromised is the appointment of chairman, CEO and board members of GLCs.

Take the case of FGV Holdings Bhd (FGV) which is shrouded in controversies of sorts.

While we understand that the appointment of its chairman, CEO and two board members are at the prerogative of the Finance Ministry as special shareholder, the very fact that the previous candidates were parachuted from Putrajaya is very disturbing.

This is not to mention the tendency to appoint active politicians without due nomination process by the nomination committee of listed GLCs (bearing in mind that there are also other shareholders, both institutional and retail).

Both oil and water – if separated – possess values that are essential to mankind’s survival. But together – as in the case of oil spill – they would spark a messy environmental disaster.

In the same manner, mixing politics with business will spark a detrimental outcome – a combo that would eliminate any positive value that the politicians or businessmen could create or contribute, one that would ultimately trigger a messy corporate disaster!

As rightly pointed out by former Khazanah Nasional Bhd managing director Tan Sri Mohd Sheriff Mohd Kassim (The Star, Jan 16 2019), investors are most worried when politics and businesses are so closely intertwined and, worse, when politicians are appointed board chairmen and the management comes from their nominees.

“Therefore, they should not be appointed to top positions in the GLCs as well as statutory bodies,” he pointed out in a letter to address a statement by Economic Affairs Minister Datuk Seri Azmin Ali that the PH government might appoint politicians at top positions in GLCs and development agencies if they possess the right qualifications.

At best, politicians should play their role in overseeing the GLCs and statutory bodies by setting up standing or select committees in the Federal parliament as well as in the state legislatures. In this regard, PH has many highly educated, talented and committed members of parliament who can serve on those committees.

Let us learn from the Felda fiasco – which is nothing surprising or new – considering that the white paper tabled at the Parliament recently has exposed various malpractices committed by politicians and their cronies who made up the upper echelons of the government agencies.

No doubt the white paper has identified potential diagnoses, namely restructuring; disposing of non-profitable assets; strengthening of corporate governance, and guaranteeing the provision of welfare aid to settlers, but this is only tantamount to initiating a cure after the cancer cells are allowed to spread to the core.

It will never be able to undo the gross misalignment of good intent as well as how human greed inadvertently wreaked havoc in the crusade to help poverty-stricken Bumiputera’s through plantation schemes.

Sadly, the white paper reflects how poorly managed our GLCs are.

This poor GLC management culture has resulted in our reliance on politicians and their cronies – many of whom possess vested interest – to spearhead Government-owned business entities.

In fact, the white paper subtly conveys the message that we simply refuse to learn our lessons from previous experiences by continuing to allow politicians and/or people connected to them to again and again make our GLCs their cash cows.

No place for politicians The Felda debacle is very much a knife slicing through my flesh considering FGV is a company that I have closely monitored ever since its initial public offering days and subsequent listing on Bursa Malaysia in 2012.

At FGV, we saw how bad the situation can be when too much power vested on one person; how power can be abused to the detrimental of the shareholders’ interest.

Concerned that the board of FGV was swaying away from guarding the interest of its shareholders, I frequently leveraged my capacity as a former representative of the Minority Shareholders Watch Group (MSWG) to question Tan Sri Mohd Isa Abdul Samad’s role as chairman in all Felda group of companies by highlighting the incessant conflict of interest.

Ironically, the FGV board defended Tan Sri Isa’s role as chairman of the agri-business conglomerate – that he has both major and multiple roles to play not only with regard to FGV business dealings but also to look after the interest of Felda settlers, political issues, society and the list goes on.

I vividly remember being told to tone down whenever I questioned the wisdom of having too many politicians on the FGV board.

I am a firm believer that business should never be mixed with politics – politicians should not be allowed to sit on boards of companies, and neither should too much power be vested on one single individual.

Very often my arguments fall on deaf ears – even those as valid as FGV should be managed professionally with the main objectives of creating shareholders’ value which shall ultimately benefit Felda as its biggest shareholder.

To this effect, the government of the day must come out clean with no flip flop decision while holding true to its manifesto of appointing only professionally qualified individuals to sit on boards of GLCs.

Loyal senior civil servants or faithful politicians can be rewarded by other means instead of having their lack of business acumen – or merely to function as tool to carry out instructions of people who put them there – to become a bane to the financial performance of GLCs.

Moreover, positions as board members should not be seen as providing them with extra income to supplement their pension without due consideration on their suitability or what value add they are able to bring to the company.

Time and again, we have seen GLCs with noble objectives falter – one after another – in the hands of political elements within their management. May the Felda and FGV debacles serve as the ultimate lesson that politicians and their cronies are not welcome on the boards of our GLCs at all.

It pains my heart to see the humble existence of a company which shoulders the welfare of under-privileged Malays crumbled in the hands of corrupt and greedy leaders who are entrusted to drive the company towards prosperity.

# The views expressed in the article represents the views of the writer and do not necessarily represent the official views of IIC.

Lya Rahman is currently the Adviser to the Institutional Investors Council of Malaysia (IIC) and is the former general manager of the Minority Shareholders Watch Group. She can be reached at lyarahman@me.com.

 

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