Adding Value Or a Payback? There Were Some 500 Ex-Senior Civil Servants Sitting on the Boards of Listed Companies Last Year
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WEEKLY ISSUE 185 PP 13917/10/2012 (030948) Peninsular Malaysia RM4.80 | Sabah & Sarawak RM5.80 (inclusive of GST) www.focusmalaysia.my JUNE 18-24, 2016 REIT listing to Sabah property market Managing AirAsia make Tiong Nam propped by rising growing public Japan faces asset light 16 commodity prices 36 debt 32 challenges 29 IHH allays concerns on high forex exposure The heatlhcare service provider is confident that its dividend payment will be intact despite its expansion drive. 24 MALAYSIA Adding value or a payback? There were some 500 ex-senior civil servants sitting on the boards of listed companies last year. While some feel the appointments are ‘rewards’ for their services, others think with their vast experience and expertise, they can Perwaja seeks more contribute to the companies. 10-12 time for revamp The company will be asking for another two months to submit its regularisation plan to SC. 14 Protasco taking its time The road maintenance service firm is not in a hurry to monetise its Kajang land. 18 Tan Sri Datuk N Tan Sri Clifford Sadasivan Dr Lin Herbert Pillay See Yan DiGi gains PP18608/03/2016(034439) DRIVEN AND DESIRED JUNE 2016 / ISSUE 4 market share THE EVOLUTION OF THE 911 but stock lags PORSCHE UPS THE ANTE WITH ITS SEVENTH-GENERATION SPORTS CAR Its share price PAGES 06-07 has not moved in tandem with its bigger market share and underperformed Tun Mohammed General (R) Tan Sri Tan Sri Siti Tan Sri the other telcos. 28 Hanif Omar Mohd Ghazali Che Mat Norma Yaakob Razali Ismail 10 FocusM | June 18-24, 2016 June 18-24, 2016 | FocusM 11 LEAD LEAD Probably, the title of the longest-serv- Ex-government officials details of the business. Ex-civil servants on boards of FBM KLCI companies ing chairman/director by an ex-civil on boards of PLCs “The ‘great and the good of the servant is held by General (R) Tan Sri land’ are often too busy to spend time Directors’ No Company Directors Mohd Ghazali Che Mat who has been Type of sector 2005 2015 needed to do their jobs effectively as 1 Malayan Banking Bhd [Maybank] Tan Sri Datuk Dr Hadenan Jalil [auditor-general of chairman of Boustead Holdings Bhd directors,” suggests Zinkin. “So while National Audit Department] Civil service 511 (81%) 496 (68.2%) perks since December 1990. having them on the board may look like Datuk Dr Tan Tat Wai [consultant of Bank Negara] Diplomatic corps 40 (6.3%) 72 (9.9%) In all fairness, there is also the diverse a seal of approval or a certificate of good ON top of drawing their monthly Datuk R Karunakaran [director-general of Mida] Tall order Judiciary 5 (0.8%) 21 (2.9%) area of expertise that some ex-civil serv- governance to satisfy shareholders, it is pensions, ex-civil servants who 2 Tenaga Nasional Bhd Datuk Nozirah Bahari [deputy secretary-general Politicians 57 (9%) 96 (13.2%) (management), Ministry of Finance] ants can offer their boards, particularly no guarantee.” are privileged to sit on the boards Regulators 18 (2.9%) 42 (5.8%) Tan Sri Siti Norma Yaakob [chief judge of Malaya] those conversant with the law like former Recalling the Enron scandal which of PLCs can expect the following Total 631 727 3 Public Bank Bhd Datuk Seri Lee Kong Lam [head of examination for directors judges Tun Zaki Azmi (Astro Malaysia resulted in the collapse of the Hou- remunerations: department, Bank Negara] Holdings Bhd), Tan Sri Siti Norma Source: Company annual reports ston-based energy company, Zinkin Average annual directors’ fees: Lai Wai Keen [general manager (policy and international), Yaakob (Tenaga Nasional Bhd) and Tan lodged with Bursa Malaysia points to the fact that while the Enron RM100,000 to RM250,000* Perbadanan Insurans Deposit Malaysia] Tang Wing Chew [Bank Negara Staff Training Centre Sri Foong Cheng Yuen (Ancom Bhd and board was highly qualified, it did not Sitting allowances: RM500 to (principal) and Operational Planning Division (manager)] T is common practice for ex-senior civil servants to be Wah Seong Corporation Bhd). Others nomination committee should review spend time needed to execute its key RM2,000 (average three to four Lai Wan [deputy manager (bank examination and internal include ex-Bank Negara deputy governor suitable candidates for the full board functions properly. hours) per board meeting audit department), Bank Negara] appointed to the boards of listed entities, especially govern- Tan Sri Dr Lin See Yan (Genting Bhd) and to consider,” he tells FocusM. “A wide “Also, when recruiting so-called ‘stars’ Committee allowances: RM500 to Cheah Kim Ling [assistant governor (payment systems ment-linked companies (GLCs). Such appointments are often prominent economist Tan Sri Sulaiman search should be conducted and not to the board or the C-suite, the nomina- RM2,000 (average three to four policy), Bank Negara] Mahbob (Telekom Malaysia Bhd). limited to contacts of board members tion committee must remember there hours) per session** 4 IHH Healthcare Bhd Tan Sri Dr Abu Bakar Suleiman seen as “rewards” for their services to the country. But weren’t [director-general of health] Also on the boards are former chief or candidates put forward by a major is no guarantee that the ‘star’ recruit’s Ithey already paid good salaries with perks, gratuity and pension to 5 Sime Darby Bhd Tan Sri Dr Wan Mohd Zahid Mohd Noordin secretaries to the government Tan Sri shareholder.” performance will be repeated in the *A 2013 study by KPMG on the profile [director-general of education] boot? Why then the need for such “rewards” after their retirement? Abdul Halim Ali (IJM Corporation Bhd), A responsible director candi- new environment,” he stresses. This is and pay of non-executive directors Tan Sri Samsudin Osman [chief secretary to the In fact, many of papers being presented,” he tells FocusM. Tan Sri Samsudin Osman (Sime Darby date, according to Yusli, should because: (NED) found that the top 300 listed government] these pensioners “There is a risk board appointments may Bhd) and Tan Sri Mohd Sidek Hassan consider whether the company which The nomination committee will not companies in Malaysia paid an aver- Tan Sri Dr Wan Abdul Aziz Wan Abdullah [secretary-general of treasury] end up earning become a source of patronage – helpful (Top Glove Corporation Bhd) and distin- has approached him/her meets his/her know how much of the “star” recruit’s age RM122,000 per annum to their Tan Sri Dr Tommy Bugo @ Hamid Bugo more than they did to the patron but not the company – guished diplomat Tan Sri Razali Ismail own criteria in terms of the board on past performance is the result of the NEDs, an increase of 37% from 2009. [state secretary of Sarawak] as civil servants if which needs the best talent on the board (chairman of Iris Corporation Bhd). which he/she wants to serve based on previous management team working ** Examples include audit commit- Dr Muhamad Fuad Abdullah [electrical engineer, their pensions are to flourish.” Malaysian Institute of Corporate Gov- the perception that it is possible to make with that person and of the support- Public Works Department] tee, nomination and remuneration Datuk Rohana Mahmood [assistant secretary of added to their direc- ernance (MICG) president Datuk Yusli valuable contribution. ing ecosystem surrounding them. committee, risk management com- planning division, Foreign Ministry] tors’ fees and other Business exposure Mohamed Yusoff feels board appoint- “It will not serve the company or its Even if the person’s reputation is well Tan Sri Dr Yusof Basiron [director-general of Palm Oil by Cheah Chor Sooi mittee, corporate governance emoluments. From a psychological viewpoint, Zinkin ments should be based on the needs of shareholders well and, ultimately, it may deserved, there is always the problem committee, tender committee, Research Institute of Malaysia] For this article, reckons that ex-civil servants may not a company in terms of work experience, compromise the director’s ability to per- of cultural mismatch and consequent investment committee, etc. 6 Axiata Group Bhd Tan Sri Ghazzali Sheikh Abdul Khalid [ambassador to we decided to concentrate on the 30 FBM appreciate what it takes to create sustain- academic/professional qualifications form his/her fiduciary duties,” reckons “tissue rejection” by senior people in the US in March 1999] Datuk Azzat Kamaludin [administrative and diplomatic KLCI counters. A survey reveals nearly able business value when they first come and diversity issues, together with the Yusli. “Just ‘going along with the crowd’ the company. officer, Foreign Ministry] 500 ex-civil servants on the boards of on board. This may be due to the fact that ability of the candidate to contribute to is not an ideal approach.” If the person brings in a team of sup- 7 Petronas Gas Bhd Datuk N Sadasivan NN Pillay [director-general, Mida] listed companies last year (see table). government departments do not have board deliberations. porting management to prevent being (ACI) to keep board composition intact Securing the right pick 8 MISC Bhd Datuk Halipah Esa [director-general, Economic Some say this is mind-boggling given customers in the true sense of the word “The board sabotaged by the existing manage- in view of business and risk environment Planning Unit] that many of these former high-ranking as their clients are citizens who have no should determine Zinkin observes that a mistake that is ment, this may cause deterioration in becoming more complex with technol- Datuk Kalsom Abd Rahman [deputy secretary-general civil servants had no business experience choice but to deal with them. Another the selection sometimes made when recruiting “a morale to the rest of the management ogy, business model disruption and (industry), Ministry of International Trade and Industry] or acumen.