The Malaysian Insight

PUBLIC listed or not, government-linked companies (GLCs) should be transparent about the how much their board members and chief executive officers are remunerated, corruption watchdogs said, after FGV Holdings Bhd shareholders refused last week to approve payment of the board’s fees and allowances.

Transparency International Malaysia (TI-M) president Dr Muhammad Mohan told The Malaysian Insight the GLCs must disclose the remuneration packages for their boards and top executives “whether they are a listed company or non-listed company”.

Companies listed on Bursa Malaysia are required to disclose the information in their annual reports.

However, non-listed companies are not required to make such disclosures.

Muhammad said the Companies Act 2016 and other related laws should be amended to require GLCs to disclose the information.

“The current regulations do not compel unlisted companies to disclose. There is no way of knowing in most cases, especially of listed companies gone private.”

Muhammad said the company should also exercise prudence and pay what what’s right, especially if it does not have good financial standing.

At the annual general meeting last week, three FGV major shareholders Federal Land Development Authority (Felda, Koperasi Permodalan Felda Malaysia Bhd (KPF) and the Armed Forces Fund Board (LTAT) declined to approve the directors’ remuneration packages in a meeting that lasted five hours.

Felda holds a 33.7% equity in FGV; KPF, 5.25%; and LTAT, 1.25%.

In essence, this means the members of the board would have worked in 2018 without pay.

The proposed remuneration of FGV Holdings non-executive chairman Azhar Abdul Hamid for the 2018 financial year was reported to be RM1.95 million.

That was the sum of his director’s fees, which were RM600,000,  salary (RM415,483.90), annual subsidiaries’ fees (RM315,000), and benefits in kind (RM313,244.35).

It made up almost a third of the total proposed payout of RM5.74 million for the board of directors.

In FGV’s case, Muhammad said it was unfair of the shareholders to completely reject the remuneration.

He said directors had to be paid their dues, even if that means a pay cut, as the board has the responsibility of turning around the embattled company.

FGV said after the AGM it would be discussing with its directors the prospect of them serving without fees.

Centre to Combat Corruption and Cronyism (C4) executive director Cynthia Gabriel said the operations of all GLCs whether public listed or not, should be made transparent and accountable.

“Part of the (Pakatan Harapan) manifesto is a promise to make Malaysian GLCs world class and right now they seem like a black hole. GLCs are getting off-the-books government funding totalling in the billions.

“And no one knows how board members are appointed and whether they have the right skills and whether they are cronies. No one knows. Their salaries and operations are not transparent either.”

She said it is crucial for the government to develop a registry for all GLCs.

Other GLC reforms should cover how appointments are made for key C-suite positions, or top senior staff, and how the money is accounted for.

The risk of confronting another 1Malaysia Development Bhd scandal looms, if GLCs are not reformed, she added.

“We will be setting ourselves up for another 1MBD scandal, because these companies are used as a source of political funding.

“If you look at the 1MBD scandal and the details of the money trail, it was clear that the company operations and its business dealings were used to raise money that eventually went to fund political parties.”

A case in point, Gabriel said, was the RM270 million of 1MDB funds that the Malaysian Anti-Corruption Commission is trying to recover through civil forfeiture suits from various organisations and individuals, including Umno and persons linked to the party.

GLC reforms are among Pakatan Harapan’s election promises that have not been kept.

Activists have criticised the government’s failure to avoid political appointments.

At a recent forum to evaluate the new government after one year in power, the Institute of Democracy and Economic Affairs noted that steps to raise the governance of GLCs to international standards had yet to take place. – July 2, 2019.