BY and large, Permodalan Nasional Bhd (PNB) has remained unscathed by governance issues. From the time of its first chairman Tun Ismail Mohamed Ali in 1978, right up to a week ago, it was considered a steady ship with a proven track record.
The transition at the helm of PNB was an infrequent affair but all that has changed as the country’s largest fund manager awaits yet another new leadership.
Jalil Rasheed’s departure was certainly raucous, so much so there was a lengthy social media debate about his position amid the reasons for his departure after nearly nine months into the job.
Prior the entry of Tan Sri Abdul Wahid Omar as chairman and Datuk Abdul Rahman Ahmad as president and CEO, PNB was considered a stodgy entity.
The fund was seen as a well-oiled entity. When Tun Ahmad Sarji Abdul Hamid took over from Ismail Ali in 1996 with Datuk Seri Mohd Hilmey as group chief executive in 1995 and subsequently Tan Sri Hamad Kama Piah Che Othman taking over in 1997 until 2016, PNB had an asset under management (AUM) of RM266.4bil.
This was certainly an achievement, given its mandate to empower and expand the wealth of Malaysians, especially the bumiputras.
However, in the last one week, a former senior civil servant has pointed out that “Ismail would be frowning on the PNB that he had set up. Ismail was famed for his frugality.”
He was known to chastise his family for using the company’s driver for non-company matters, emphasising that “PNB is not my company, it is for the benefit of the unit holders especially bumiputra investors.”
Talks of imminent leadership changes at the PNB picked up speed this week, and many are wondering what that would mean to the direction and strategies of the fund.
PNB will likely be welcoming a new group chairman, replacing Tan Sri Zeti Akhtar Aziz, whose contract is expiring early next month.
The fund has grown over the years. Even when Wahid and Abdul Rahman took over from Ahmad Sarji and Kama Piah, the AUM had grown from RM266.4bil to RM312bil. PNB at the end of last year was managing funds totalling RM312bil.
And one can only wonder if a new CEO will cause another change and cultural disconnect within PNB.
In May 2018, PNB was not spared, after the sweeping victory of Pakatan Harapan at the 14th general election that saw a full leadership overhaul at the board and top management of government-linked companies (GLCs) by the ruling government under the then Prime Minister Tun Dr Mahathir Mohamad.
This has led former Bank Negara governor Zeti to be appointed as PNB group chairman on July 1,2018 replacing Tan Sri Abdul Wahid Omar, who has served from Aug 1,2016 to June 29,2018.
Another drastic change in the PNB leadership was when Jalil was made president and group chief executive in October last year. He succeeded Abdul Rahman, whose contract expired last September.
A former banker says: “Rahman has an impeccable pedigree and it was strange to remove him and give him a non-executive position at Sime Darby at that time.
“He is young, bright and terribly hard working. It is good that they have now parked him at CIMB. From my dealing with him, he was driven and clearly has lots of energy to spare. They put him out to pasture too early, it’s good they brought him back.”
Political discord struck Malaysia early this year following the surprise resignation of Dr Mahathir and the appointment of Tan Sri Muhyiddin Yassin as the new PM in March under the Perikatan Nasional government.
Under a new ruling government, another round of top leadership changes among the GLCs and GLICs is deemed as inevitable.
Leadership change dilemma
For PNB, one question that comes to mind is whether the constant abrupt changes at its top leadership in the past four years will disrupt the group’s growth strategies and good track record performance, going forward?
According to Pankaj C. Kumar, a former investment and corporate strategy director, leadership changes happen all the time.
“Some (leadership or corporate) changes are pre-planned, while some are not. At the end of the day, it will be the strategic direction set by the board of directors that is important and that long-term plan must be clearly spelt out.
“A change in leadership would not necessarily alter the business directions set by the previous board unless and until the situation or circumstances warrant it, ” explains Pankaj.
Having said that, a new leader will definitely try to add value to the stage that has been set with his or her own ideas.
“But this ultimately must be agreed upon by the board of directors and it must also be for the right intention and purposes, ” he points out.
Strategies moving forward
Wahid and Abdul Rahman, along with his management team, had mapped out a six-year PNB Strategic Plan 2017-2022 to deliver sustainable returns, increasing the bumiputra wealth as well as consistent and competitive returns to its unitholders.
The road map would also internationalised PNB’s operations beyond Malaysia and see the fund get involved in higher return activities such as private equity.
It was during Wahid’s tenure as chairman that the fund published its first annual report after a long while. The absence of a regular annual report was a knock on the previous management.
Under Zeti and Jalil, the fund further enhanced its sustainability roadmap via Strategic Plan 2020-2022 that was unveiled just last month during the release of PNB’s Annual Report 2019.
PNB’s strategic plan for 2020-2022 dubbed as “Focus 4” outlines diversification, value creation, risk management and organisational transformation amid the future headwinds and evolving market landscapes.
By 2022, PNB aspires to grow its AUM by at least 4.5% annually to RM350bil.
According to a professor with a local business school, there seems to be no major disruptions in executing the fund’s existing corporate strategies when Zeti took over from Wahid as PNB chairman in 2018.
“The goals set out for PNB remain intact despite Strategic Plan 2017-2022 under Wahid and Strategic Plan 2020-2022 under Zeti.
“The target is for PNB’s AUM to hit RM350bil by 2022 with the company continuing to further monetise its assets, ” adds the professor.
More importantly, PNB is also set to raise its global exposure to 30% of the total investment portfolio by 2022. As at end-2019, PNB’s global exposure has increased to 8.5% versus 3.3% in the preceding year.
Of the global investments, 70% were public equity investments, with 14% real estate, 4% private investments and 12% cash.
Other plans in the pipeline include diversifying its portfolio into real estate funds and private equities in emerging markets.
In 2019, the company posted RM10.7bil in net income, which contributed to a 5.4 sen payout per unit for fixed price funds. The return was a shock to unitholders given the meagre amount compared with previous returns.
It was understandble why that was the case as the heavily-exposed equities fund has weathered a terrible period of underperformance of stocks on Bursa Malaysia.
PNB’s portfolio covers strategic investments in Malaysia’s leading corporates, global equities, private investments and real estate.
The fund holds stakes in Malaysia’s biggest public-listed companies such as Malayan Banking Bhd, Sime Darby Bhd and UMW Holdings Bhd with domestic equity investments equivalent to about 10% of Malaysia’s stock exchange’s market capitalisation.
Hence, it will be interesting to see what other value-added strategies that the next PNB top leadership could bring to the table, moving forward.
“Both the new chairman and group CEO have multiple important tasks to carry out the mandate as PNB that was set up in 1978, is one of the instruments under Malaysia’s New Economic Policy, ” adds the professor. Wahid and Rahman were a good team and they understood PNB’s culture without causing a disruption to the cultural balance at PNB according to people familiar with them. Some observers feel that Jalil may not have enjoyed the same connection.
Meanwhile, Alliance Bank Bhd chief economist Manokaran Mottain says in general, once the new leadership steps in, there could be a “policy discontinuity”.
“Therefore, any abrupt changes in the existing policies of a company as a result of the leadership changes at the top management is never a good thing, ” he adds.
Having said that, in the case of Zeti, her contract is already expiring early next month.
However, the situation is totally different for Jalil, says an industry observer.
While Jalil claims of harassment and safety concerns that led to his resignation, the Securities Commission is now cracking the whip citing discrepancies in PNB’s submission pertaining to the academic and working credentials of Jalil.This was despite the declaration by PNB earlier that all information provided in its submission to seek SC’s approval for Jalil’s appointment was “true and correct”.
The SC had sought clarification from the relevant parties on the discrepancies while PNB said it has formed an inquiry team to investigate the matter.