I REFER to reports in the media about the appointment of politicians as directors of government-linked companies (GLCs).
GLCs are federal- or state-owned companies, carrying out business in the commercial sector. Statutory bodies and trust agencies also have their GLCs.
All these public sector commercial enterprises justify their business activities as a mandate under the New Economic Policy to increase bumiputra participation in the economy. It’s a noble cause which all Malaysians support, but as GLCs account for a large part of the economy, their operations must be transparent.
Currently, no one knows how many GLCs there are in the country, how they are financed, what their chairmen, directors and CEOs do and how they are appointed. The ones that are known to the public are companies owned and controlled by the four big investment funds, namely Khazanah Nasional Bhd, EPF, Permodalan Nasional Bhd (PNB) and Lembaga Tabung Angkatan Tentera (LTAT). Several of their companies are listed entities and, as they have local and foreign shareholders, they are regularly reported in the business news. Their governance standards are based on the Putrajaya GLC Transformation Programme, which was issued in 2005 to revamp their boards and management for achieving better results.
The rest of the GLCs, however, were not covered under the Transformation Programme. It was expected that they would follow the examples set by the participating institutions under the programme to make similar changes to their boards and management. Not much is known about how many of them did upgrade their corporate governance and how independent their boards are in appointing their directors and top management or their quality. It is believed that as their boards are highly politicised, making the changes is difficult.
The private sector has often complained about the unfair competition with GLCs that are favoured with government contracts and financing. The privileges that GLCs enjoy increase the risks that private sector companies face in the economy. The risks are greater when they see politicians from the ruling party sitting on the boards of the companies as chairmen and directors. This can deter private companies in making their business plans.
In order to restore business confidence in the economy, it is essential to review the necessity for the GLCs to exist after nearly 50 years of the New Economic Policy.
It is recognised that GLCs, which are strategic to the economy and bumiputra interests, and which have potential to become global champions, or are pioneers in the use of innovative technology, should be retained in the public sector to play their developmental role.
The others that are not relevant to the development objectives and those that are continuously dependent on government funding or are competing unfairly with the private sector should be phased out.
Most state-owned GLCs are not self-reliant in financing and are a burden on state budgets. They should be closed down.
We have been told by Putrajaya that no politician will be nominated as chairmen or CEOs of GLCs. However, other directors may be politicians but they must be professionals with proven track records.
It is hoped that when these nominees are proposed, the GLC boards will evaluate them under the established guidelines, which were introduced after the shock of the East Asia financial crisis of 1997/98 that led to several banking and corporate failures, including GLCs. Governance reforms were introduced by Bank Negara Malaysia and the Securities Commission to ensure that all nominees to board positions are evaluated under the “fit and proper” criteria.
There should be no special treatment to exempt political nominees from the evaluation process as that will make a mockery of the GLC guidelines. If they are not fit and proper, the boards should exercise their independence and fiduciary duty to reject the nominees.
GLCs should also be brought under parliamentary oversight. Parliament has agreed to create standing and select committees to oversee the work of ministries and their agencies, and conduct inquiries into matters of public concern. GLCs and statutory bodies should be included as a priority subject matter for the parliamentary committees in view of the scandals that happened to 1MDB, Felda and Tabung Haji, among others.
GLCs should be required to submit regular progress reports to Parliament, and their chairmen and CEOs should appear before the committees to brief the parliamentarians and answer their questions. Where necessary, the committees should invite professionals, experts and civil society organisations to comment on the reports and give their views. The hearings should be broadcast live in the interest of transparency and accountability.
By empowering Parliament with oversight responsibility, MPs would be more focussed in their debates on the economy and public policy. The parliamentary hearings will enable our elected representatives to hear different views on the reforms needed to take the economy to higher ground.
Parliament, hopefully, will have the political courage to propose the necessary reforms to reduce the size of the GLC sector in the economy and strengthen its capacity to contribute to national development.
TAN SRI MOHD SHERIFF MOHD KASSIM