Invisible hands in corporate Malaysia?


The uncertainties shrouding the appointment of a permanent CEO for TELEKOM MALAYSIA BHD (TM) received a new twist at the company’s AGM recently.

Attending the meeting as a proxyholder, I was one of the shareholders who sought clarification on the status of the appointment of a permanent CEO.

And to my disappointment, rather than shedding light on the prospect of acting CEO, Imri Mokhtar, being elevated to a permanent position which is a major concern raised by shareholders, the company’s chairman, Rosli Man, provided a rather conflicting statement on the issue.

To begin with, he used “MoF” (Ministry of Finance) and “PMO” (Prime Minister’s Office) interchangeably to refer to TM’s special shareholder although shareholders are well-aware that the right attribute should be the MoF.

At the outset of the AGM, Rosli stated that the TM board has recommended for Imri to be confirmed as a permanent CEO but response was not forthcoming from the MoF which holds special rights on the appointment of CEO.

Imri was appointed to his current position on Nov 16 last year following the resignation of Datuk Bazlan Osman who only served for five months in a similar capacity after the departure of Datuk Seri Mohammed Shazalli Ramly as group CEO.

Towards the tail-end of the AGM, however, Rosli sang a different tune by remarking that the appointment of Imri as CEO was approved by MoF in February this year.

This eyebrow-raising statement implies two likelihood – either (i) he was trying to cover up something or (ii) having caught in a quandary, he slipped his tongue by saying something which he shouldn’t.

Damaging consequences

From a corporate governance stand-point, the different accounts are troublesome.

As a chairman, is this is a reflection that perhaps, he has his own agenda?

Presumably as a damage control measure, TM was forced to issue a media release afterwards to clarify that any decision on the group CEO position has to go through its board of directors (BOD) and major shareholders.

“At TM, there are processes comprising BOD’s governance and processes by our major shareholders such as the MoF and Khazanah Nasional Bhd on such matters,” it pointed out. “Any formal announcement relating to the group CEO position will be made in due course.”

Ridding political interference

Tracking the chain of events closely, the question that comes to mind is to whom the letter of approval by MoF was addressed to? If it was indeed addressed to the chairman, why then did Rosli mention in the first place that MoF did not respond to the recommendation from the TM board?

It is unacceptable that a matter as important as the appointment of the CEO can be taken lightly with wrong information conveyed to the shareholders.

More baffling is Rosli’s subsequently clarification that MoF has approved the appointment of Imri as CEO in February but the PMO has instructed the board to put on hold any announcement pertaining to the CEO’s appointment.

Why is PMO interfering with the decision made by the special shareholder which in this instance is MoF? Are there people in PMO who are more powerful than the PM and the Minister of Finance?

Understandably, this unacceptable practice was very much prevalent during the days of the previous administration when there was no clear separation of role between the PMO and MoF previously considering the Prime Minister also held the Finance Minister portfolio. Hence, more often than not, it was the PM who made announcements on the appointment of CEOs or chairmen of listed GLCs.

As a new era has dawned on corporate Malaysia with the outcome of the 14th General Election on May 9 last year, it is much appreciated that government-linked companies (GLCs) especially must no longer get themselves confused between the MoF and PMO.

Allowing the tendency of interference to rear its ugly head is obviously a distortion of corporate governance practice. Worst still, this works against the principles of good governance that the Pakatan Harapan government is propagating in its quest to enhance the governance of listed GLCs which also count other shareholders aside from government-related entities.

If really there is intervention by PMO, then I note with disappointment that this unacceptable practice still exists.

Bucking up

This latest development in TM reflects an erosion in the principles of good corporate governance (CG). The present state of CG deterioration saddens me given TM has always been exemplary in its CG practices.

During my stint with the Minority Shareholders Watch Group, TM had always been under my radar. I was very impressed at how its previous chairmen and board members had strived to improve the company’s CG practice.

Is the current state of affairs a tell-tale sign that the time is ripe for TM to relook at the actual implementation of its CG practices which has since deteriorated with the interference of the PMO on the appointment of its previous CEO?

Without wanting to point finger at anyone, TM has to seriously re-examine the root causes of its failure to strengthen its CG agenda. In this case, its board needs to redeem its integrity – and to stand up against a leadership which has cast doubt as far as integrity is concerned.

Already TM is facing challenging times with pressure mounting on its financial performance as well as being deemed too slow to meet the government’s aspiration of wanting the country wired up with fibre soonest.

Thankfully, its net profit almost doubled in the first quarter ended March 31, 2019 to RM308.28mil (1Q2018: RM157.15mil) mainly due to a reduction in operating costs.

This is somehow a reversal of fortune given for its 2018 financial year-end, its net profit dipped 83.5% to RM153.15mil (FY2017: RM929.75mil) having been adversely impacted by persistent headwinds in the industry as well as tough operating landscape.

This was after making a provision of RM982.5mil for the impairment of fixed and wireless network assets due to the continued pressure from challenging business, industry and economic conditions.

Considering the recent brouhaha at its recent AGM, one wonders if the chairman is still fit to lead TM.

Perhaps Bursa Malaysia has to step in to clear the air as the interest of both major and minority shareholders of TM can be jeopardised by the indecisiveness demonstrated by the person entrusted to lead the company’s board.

After all, TM badly needs to regain the trust of shareholders in its effort to recover its market capitalisation which has been battered by a dip in its share price over the past year.

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

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


   

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