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Upholding integrity: Ismail (centre) chairing the EAIC coordination meeting with heads of enforcement agencies. — Bernama
Problematic government officers found to be involved in malpractices or wrongdoings must have their services terminated early to put an end to integrity issues involving civil servants and management, proposed the Enforcement Agency Integrity Commission (EAIC).
Its chairman Tan Sri Ismail Bakar said the Malaysian civil service was once revered among the Commonwealth nations but noted that it is now entangled with integrity issues.
Ismail said giving marching orders to civil servants who are problematic is the way to go to prevent integrity issues from festering at the new department these officers are transferred to.
We are working on eradicating problematic officers in (government) agencies by way of early termination of their service. If the government agrees on this, it will be easier for us to perform our duties,” he said.
Ismail provided examples of court cases involving civil servants who have engaged in malpractice or misconduct.
“But we lost (the case). With the relevant laws, we can see how to terminate their service without having their case concluded in court trials,
Ismail said there has been precedent where problematic officials were terminated, citing existing regulations such as the Public Officers (Conduct and Discipline) 1993 that provide for this.
He described the practice of transferring problematic officials to a different department as “a vicious cycle”, which might not be a deterrent.
“What is also worrying is that some civil servants and enforcement officers would get a third party, such as an influential individual or a company, to protect their wrongdoings.
“What is more saddening is that there are higher-ups who are complicit in their subordinates’ wrongdoings.
“In fact, some have even led such activities. Such deeds have tarnished the civil service’s image,” Ismail said.
He said if enforcement agencies’ disciplinary bodies do not adopt EAIC’s recommendations, it sends a signal that they are not serious about eradicating wrongdoing.
Ismail, who is a former chief secretary to the government, also said that low wages should not be an excuse to be corrupt.
“You already knew your wages (before joining the service), so why did you still take up the job?
“Never use low wages to legitimise corruption,” he said in his opening remarks at the EAIC coordination meeting with enforcement agencies’ department heads yesterday.
“If you love the civil service, carry out the duties you are assigned responsibly,” he said.
Ismail said the EAIC had received 229 reports on integrity cases between June 1, 2023, and May 31, this year, with the highest number of cases related to the Immigration Department.
During this period, the commission initiated 17 investigation papers regarding alleged malpractices by civil servants.
Almost 90% of the probes have been completed and decisions have already been reached regarding two individuals who are being investigated.
The EAIC had, among other things, recommended terminating the public officers’ service, halting their promotion and issuing warnings.
EAIC is a federal statutory body responsible for monitoring and investigating public complaints about the alleged misconduct of enforcement officers or agencies as listed in Act 700.
Currently, it has 21 enforcement agencies under its supervision.
This includes the Immigration Department, Customs Department, Malaysian Maritime Enforcement Agency, National Registration Department and Road Transport Department, among others.Ismail also said that the commission is looking for more agencies to fall under its jurisdiction.
Leading the pack: Tan beats Cook, Musk and Zuckerberg in the analysis by the WSJ. — Photo from Broadcom Inc
Tan tops list of highest paid executives in the US last year
PETALING JAYA: The highest-paid chief executive officer in the United States is neither Apple’s Tim Cook nor Tesla’s Elon Musk, but Malaysian-born businessman Tan Hock Eng.
Tan, 71, also surpassed Meta Platforms’ Mark Zuckerberg by earning US$162mil (about RM760mil) in compensation last year, according to South China Morning Post, which quoted an analysis by the Wall Street Journal (WSJ) this week.
“Tan, who is a US citizen, is the CEO of semiconductor company Broadcom Inc and has been topping the pay charts since 2006, receiving US$103mil in 2017,” said WSJ.
However, the pay package comes with several conditions, including the company’s stock hitting a certain level by next year. Tan must also remain as CEO for an additional five years, and he will not receive any more equity or cash bonuses during that period.
The semiconductor company’s shares rose 106% over the past 12 months, bringing its total market capitalisation to US$655bil (RM3 trillion).
Tan is also a board member of Meta Platforms, the US-based company that owns Facebook, Instagram and WhatsApp among others.
Tan, who hails from Penang, completed his undergraduate studies in mechanical engineering at the Massachusetts Institute of Technology.
He also has a bachelor’s degree in electrical engineering from the National University of Singapore. He then earned a Master of Business Administration from Harvard University. After returning to Malaysia, he was involved with Hume Industries between 1983 and 1988.
He then moved to Singapore as managing director of venture capital firm Pacven Investment.
He reportedly relocated back to the United States in 1992 and assumed the role of vice-president of finance for PC maker Commodore International.
EMPLOYEES today are more aware of their options and are in a better position to decide on roles that align with their interests, values, and priorities.
Our 2022/23 Malaysia Salary & Employment Outlook notes that younger employees tend to prioritise career progression opportunities and a healthy work-life balance compared to employees from other age groups.
Therefore, in the post-pandemic world of work, it is important for employers to engage with employees to address challenges and shape solutions together. It is a process that needs to be carried out effectively and continuously.
With the integration of Artificial Intelligence (AI), among other technological developments, new opportunities and challenges have arisen. One primary example is the high demand across key economic sectors for talents skilled in digital fields.
With the prevalence of all things digital, accelerated further during the movement control order, contactless payments such as e-wallets and mobile banking have seen a spike in consumer adoption. In tandem with this demand, the Malaysian government has introduced multiple initiatives to drive the fintech boom and encourage more Malaysians to hop onto the growing digital economy.
As the industry continues to transform, the roles and requisite skills will evolve in tandem. Taking this into consideration, employers must look beyond hiring simply to fill roles. Instead, they must invest in upskilling programmes to ensure talents are available to take on the evolving responsibilities at every level of the organisation. Individuals with cross-functional skillsets across finance and tech will be in especially high demand.
Specialised roles, such as product development, product management life cycle, and data analysts, are some of the hot jobs to look out for. In the post-pandemic business world, many organisations have since undertaken their own digital transformation, leading to rising demand for skilled IT talents.
On the flip side, this creates a highly competitive job market as organisations are expected to adopt a more aggressive approach in hiring the best talents. This means employers who have an existing IT talent pool would also need to step up their retention strategies to avoid losing their talents.
Fierce competition within the industry also serves as a reminder for the workforce to regularly reskill and upskill themselves to stay relevant. In 2020, with the onset of the pandemic, e-commerce experienced a boom when Malaysians, young and old, became regular online shoppers due to the movement restriction orders.
Today, prospects remain strong for careers in the supply chain field as online shopping habits have become part of the new normal.
As the economy strengthens, businesses will need to re-evaluate their strategy and remain on top of supply chain trends to fulfil customer satisfaction while staying profitable. Therefore, there is a growing demand for both white and blue collar workers who have the skills to meet the physical and technological demands of today’s supply chain and logistics careers.
In the post-pandemic world of work, industries have transformed, roles have evolved, and expectations have changed. With this, organisations that engage employees in shaping solutions and addressing challenges will continue to thrive.
The employment market has shown a strong rebound since the country began its transition into the endemic phase of Covid-19. As our economy recovers against new global challenges, ensuring the resilience of the workforce is the way to go if businesses are to thrive.
To win in the marketplace, employers must first ensure they win in the workplace.
BRIAN SIM Country head and managing director PERSOLKELLY Malaysia
FILE
PHOTO: A view of the London skyline shows the City of London financial
district, seen from St Paul's Cathedral in London, Britain February 25,
2017. REUTERS/Neil Hall/File Photo/File PhotoReuters
UK Audit Shake-Up Targets Big Firms After Spate of Corporate Failures
LONDON (Reuters) - Britain set out sweeping reforms of big company audits on Tuesday after high-profile collapses at builder Carillion and retailer BHS in recent years hit thousands of jobs and raised questions about accounting quality.
The business ministry detailed changes to auditing and corporate governance that will be put into law, though the measures are unlikely to come into force until 2024 or later and smaller firms will be shielded from the new rules.
The reforms are in response to 150 recommendations from three government-sponsored reviews on improving auditing in a market dominated by KPMG, EY, PwC and Deloitte, known as the Big Four.
The new law would create a more powerful regulator, the Audit, Reporting and Governance Authority (ARGA), to push through changes set out by government.
In the meantime, the current watchdog, the Financial Reporting Council (FRC), will have powers to vet audit companies and ban failing auditors, the ministry said.
Britain will also review a European Union definition of "micro entities", which benefit from simplified accounts. They typically have a balance sheet of no more than 350,000 euros ($377,230) and employ no more than 10 people.
Loosening the definition would mean more firms saving money by filing simplified accounts, though it could raise investor protection concerns. Other reporting requirements will also be reviewed to help attract growth companies to Britain.
The FRC currently focuses on big listed companies, but ARGA's remit would expand to include about 600 private firms with more than 750 staff and an annual turnover of over 750 million pounds ($949 million), a higher threshold than initially flagged. BHS was unlisted.
NO UK SARBANES-OXLEY
To curtail the dominance of the Big Four, the top 350 listed companies would have to appoint a non-Big Four accountant, or allocate a certain portion of their audit to a smaller accountant such as Mazars, BDO or Grant Thornton.
The business ministry could introduce market share caps on the Big Four if there is no improvement in competition.
Directors of premium listed companies would also have to state why they think their internal controls are effective.
This would be done under Britain's "comply or explain" corporate governance code, which the FRC can change without legislation.
UK companies pushed back against enshrining in law a version of mandatory U.S. Sarbanes-Oxley rules, which force U.S. directors to personally attest to the adequacy of internal controls, and face prison for breaches.
"Lessons from Carillion and other recent company failures have been ignored, with little emphasis now on tightening internal controls and modernising corporate governance," said Michael Izza, chief executive of ICAEW, a professional accounting body.
FRC chief Jon Thompson said: "The Government’s decision not to pursue the introduction of a version of the Sarbanes-Oxley reporting regime is, the FRC believes, a missed opportunity to improve internal controls in a proportionate, UK-specific manner."
Big firms would also have to state what external checks, if any, were made on the reliability of their non-financial information in annual reports, such as risks from climate change.
Larger companies would have to confirm the legality of their dividends, a lesson from Carillion.
For its part, EY is under particular pressure due to its auditing of collapsed German payments firm Wirecard AG – although it’s not clear that a break-up would rid it of any liabilities arising from that failure. Perhaps EY is preempting tougher regulation.Or perhaps it just sees an opportunity to monetise some of it assets.
A possible split of EY into separate audit and consulting firms must confront the problem faced by all break-ups: How do you create attractive businesses out of both when one is likely to be seen as inferior?
Here, that would be the newly established standalone auditor. EY – or any Big Four accounting firm that attempts such a separation – has its work cut out to make pure-play audit a success.
The revelation by Michael West Media that EY is considering the move heralds a potentially seismic shift for the industry.
A succession of accounting scandals has long prompted attacks on the Big Four for earning fees from audit clients by selling consulting services such as strategy or restructuring advice.
There’s an inherent conflict of interest in offering these to the same executives whose homework you’re meant to be marking.
While regulatory scrutiny is forcing firms to tread carefully, creating distinct companies is the most reliable remedy.
The United Kingdom’s competition watchdog called for an “operational separation” of audit and consulting within the existing firms in 2019, stopping short of demanding full break-ups because of cost and complexity.
For its part, EY is under particular pressure due to its auditing of collapsed German payments firm Wirecard AG – although it’s not clear that a break-up would rid it of any liabilities arising from that failure.
Perhaps EY is preempting tougher regulation.
Or perhaps it just sees an opportunity to monetise some of it assets.
One option under consideration is the sale of a stake in the consulting business to a private buyer or to the stock market, creating a windfall for EY’s current partners, according to the Financial Times. Demand would likely be strong.
Just look at the private-equity money piling in lately. PwC sold a tax advisory practice to Clayton, Dubilier & Rice for a reported US$2.2bil (RM9.6bil) last year, while KPMG offloaded its UK restructuring arm to HIG Capital LLC.
But what about the rump that remains?
While the underlying economics of the Big Four are opaque, there’s a widespread suspicion that consulting subsidises audit.
At the very least, the ability to share costs means audit fees are lower than they would be for a distinct firm, regulators have found.
Retaining talent
The biggest challenge is how a standalone auditor would attract and retain talent without offering an in-house career in consulting as an option.
Short-sellers and forensic investigators aside, checking company accounts is for many a laborious gateway to other roles.
Audit partners accused of getting it wrong have regulatory probes hanging over them for years (an investigation into Rolls-Royce Holdings Plc’s 2010 accounts only just closed).
No wonder juniors tend to jump ship to better paid and less risky careers in consulting or investment banking not long after they’re qualified.
So auditing will have to be made more attractive, both financially and culturally.
One place to start is expanding the function beyond checking financial statements to offering sophisticated checks on companies’ claims on non-financial performance such as climate and social impact.
When the United States Securities and Exchange Commission is clamping down on greenwashing by investment funds, it’s clear the future of environmental, social and governance investing rests on companies proving they’re not cooking the books on these issues too.
These public-interest assessments are going to be increasingly scrutinised by investors in future.
They are already offered under the umbrella of so-called assurance services, but ought to become a more developed part of corporate reporting.
That would involve transferring some skills over from the consultancy side. The trick will be to add in parts of the current consulting business that are relevant to a more modern vision of audit, without just recreating a new auditor-cum-consultancy.
Of course, separation won’t eliminate all the conflicts in audit.
The chief culprit is the way managers often effectively appoint the audit partners who are meant to be their policemen.
But the prize for stock-market investors is improved audit quality, and a break-up could support that.
The goal should be to create a virtuous circle.
Make audit more enticing as a long-term career, attract people who do the work better – and hopefully cut the number of blow-ups. — Bloomberg
Chris Hughes is a Bloomberg Opinion columnist covering deals. The views expressed here are the writer’s own.
Absorbing topic: Ouyang (top centre) with local academics (clockwise
from top left) Dr Chang, Prof Wong, Dr Chan and Dr Ngeow discussed the factors behind China’s success at the recent ‘Governance of China: Perspectives from Southeast Asia’ webinar.
CHINA’s success in building a strong economy, eradicating abject
poverty, curbing the spread of the deadly Covid-19 virus and promoting
the Belt and Road Initiative (BRI) to benefit the world can be
attributed to its strong governance capability, according to a recent
seminar.
From a backward country in 1978 to an economic juggernaut today, the
Middle Kingdom’s rise over the past 40 years has been spectacular. What
has its leaders done to create one miracle after another? This question
has spurred academics at the Institute of China studies (ICs),
Universiti Malaya, to explore factors behind Beijing’s achievements.
This former “sickman of Asia”, invaded and humiliated by the West in the
19th and first half of 20th century, is now the world’s second biggest
economy. It is also the world’s manufacturing powerhouse and the largest
trading nation. It has lifted about 800 million people out of poverty
since Deng Xiaoping introduced reforms.
On the technological front, China is a pioneer and global pacesetter in
5G rollout, e-commerce, artificial intelligence, robotics, high-speed
railway, satellite navigation and space exploration.
In the “Governance of China: Perspectives from southeast Asia” webinar,
jointly organised by the ICs and the Chinese Embassy in Malaysia, Prof
Datuk Dr Danny Wong highlighted China’s 1.4 billion people are enjoying a
very high standard of living.
“China’s development plans and programmes are the envy of many nations.
All these achievements speak volumes of the country’s ability to govern
well – to be able to translate strategic plans into effective programmes
that bring results.
“One of the things that struck me as important and relevant now is the
manner China has been able to handle the Covid-19 pandemic very well.
This is a clear display of China’s strong governance capabilities – both
on the home front as well as in the international arena,” said Prof
Wong, who is the dean of UM’s Faculty of Arts and social sciences.
Prof Wong, also former director of ICs, shared his ground experience in
witnessing China’s ability to plan and implement longterm education
strategies.
Earlier this year, China announced economic goals for 2025 and 2035, and a carbon-free goal by 2060.
Analysing Beijing’s multi-decade efforts in poverty eradication, ICs
director Dr Ngeow Chow Bing attributed the success to Beijing’s strong
determination in eliminating poverty, market-oriented economy and
government’s strong involvement.
China’s governance system is unique, Dr Ngeow explained. Within the
system is a political structure with a very strong cadre/ official
mobilisation capability, target-based governance and pairing assistance
between rich and poor areas.
The specialist in China affairs said: “Under President Xi Jinping, the
‘last mile’ (the last 99 million very poor people) of poverty
eradication was targeted with precision. Party officials were stationed
at remote areas and their problems solved with tailored solutions.
“While China’s institutional structure is vastly different from other
countries and not replicable, its strategies in wiping out poverty can
be learnt.”
Giving the official view, Chinese Ambassador to Malaysia Ouyang Yujing
said: “The secret of China’s effective governance is not enigmatic. It
lies in the political system – the socialist system with Chinese
characteristics adopted by the Communist Party of China (CPC).”
He said the “people-oriented” philosophy of the CPC in governance
has won over the hearts and confidence of its people. This could be
proven by surveys. And due to this, citizens are prepared to endure
hardship and sacrifice to help the government achieve its goals.
A stark example is seen in the lockdown of Wuhan in combating
Covid-19 last year, when residents showed a high degree of obedience
towards the directive to stay home and sacrifice personal freedom for
weeks.
Dr Peter T.C. Chang, deputy director of ICs, pointed out that
China’s unique one-party state has enabled the country to choose its
leaders in an effective manner. And the government has built up a
trusting relationship with the people.
But he opines China should not be seen as a threat, despite the
fact that it has become a global power with footprints around the world
through BRI.
“China’s rise is comparatively peaceful and benign. CPC ideology
is for China only. From Asean’s perspective, China is not a threat in
colonisation. We do not think China harbours that ambition, although
there are territorial disputes in the south China sea,” said Chang.
Apart from the CPC, China’s state-owned enterprises (SE) have also
played an important role in effective governance, according to Dr Li
Ran.
Within each SE is a CPC party committee functioning as a governing
body, similar to the board of directors in a company, she explained.
“This party committee ensures that the CPC’s policies and
strategies are executed. And this structure has made SE become the
visible hand to manage economic activities on behalf of the state,” said
Dr Li, a Chinese national serving at the ICs.
Many SEs have been mobilised to implement BRI projects overseas.
In Malaysia’s ECRL, China Communications Construction Company (CCCC) and
Exim Bank of China are the SES expected to ensure this state-linked
project will be a success.
But not all is rosy in SE governance as there are “zombie
enterprises” that have incurred huge losses or production over-capacity.
some have even been dragged down by corruption and scandals. All these
incidents have tarnished the image of Chinese governance.
However, under the leadership of President Xi, a lot of emphasis
has been placed on rooting out corruption and improving SE performance,
Dr Li observes. Harsh actions were taken against government officials
and CPC leaders involved in wrongdoings.
But still, China has under-performed in terms of institutional
indicators and qualities in the region when compared with four leading
Asean nations, according to Assoc Prof Dr Chan sok Gee.
Her studies, however, showed there is now more accountability in
SES, improved government effectiveness and political stability under the
leadership of President Xi.
As China celebrates the 100th anniversary of the founding of the
CPC this month to remind its people of the role played by the CPC in
making China great again, its unique system of governance has emerged to
be a key part of many analytical writings on China’s success story
today.
BY HO WAH FOON
Celebrating CPC centenary
Keepsake: A China Post staff holding a set of 20 commemorative stamps
and a commemorative cover issued in celebration of the 100th anniversary
of CPC. — Xinhua
China
celebrated the ruling party’s anniversary last week. But for the
ordinary citizens, they have their own way to mark the event.
MANY
couples rushed to tie the knot last week in China. They wanted to
commemorate their special day just as China celebrated the 100th
birthday of its ruling party, Communist Party of China.
A bride from Beijing said she chose July 1 to register her marriage for long lasting relationship.
“Hope our love would last 100 years, just like today’s celebrations,” Shasha Liu told the local media last Thursday.
It
was the day to mark the 100-year formation of the CPC, the sole
political party in power that had led the country to become a moderately
prosperous society.
Marriage registration offices across China recorded a higher number of couples getting hitched last week.
A
Civil Affairs Bureau worker in Jinan city of east China’s Shandong
province revealed that they received more than 30 couples in the morning
alone.
“I could see that many of them are party members as they were
wearing a party emblem on their clothes,” she told the Global Times,
but did not reveal the average daily number of couples who had visited
the place.
At Baoshan district of Shanghai, a long line of people waited with excitement to start their new life.
“My
girlfriend and I are both party members, so we thought this would be a
unique way for us to mark this special day and also for the country,” a
man, who only wished to be known as Bai, said.
At a hospital in
Zhengzhou of central China’s Henan province, a couple in their 80s sang
songs along with other patients and medical staff as they celebrated
their 50th marriage anniversary.
The pair made the hospital ward their home after the man was admitted for Alzheimer’s several years ago.
“It has been 10 years since he has the disease.
“Even if he has forgotten about everything, I will continue to be by his side,” said the wife as she leaned on her husband.
Identified only as Li, she said their children were busy making ends meet and could not take care of them.
Stamp
collectors across the nation got into a frenzy purchase of
commemorative stamps and envelopes issued by China Post to commemorate
the occasion.
The set of 20 stamps and envelopes reveal the 100-year journey of CPC.
The
stamps use red and gold as the main tones while the envelopes contain
patterns of the party emblem, Great Wall and a golden inscription of
Chinese characters saying “Staying true to our original aspiration and
founding mission”, Global Times reported.
A long queue of people formed outside a post office in Shanghai as early as 6.30am.
Among them was 66-year-old Yang Chaode, who travelled 4,000km from Xinjiang Uighur Autonomous Region.
He had waited for the launch since the day before.
“My
friends in Xinjiang are waiting for me to send the letters to them,
with the postmark in Shanghai, the birthplace of CPC,” Yang added.
In
Wuhan, public bus driver Nie Sanhua cleaned up his vehicle in the early
morning before decorated the interior with stickers, posters, party
flag and other paraphernalia related to the celebration.
The CPC, founded on July 1, 1921, with just 50-odd members has grown with more than 95 million members.
The formation of the party was proclaimed in front of 12 people onboard a boat at a lake in Zhejiang province.
For decades, the CPC was in the dark on its founding date as there were hardly any records about its formation.
So, the party declared July 1 as its established date in 1941.
In the 1980s, more information was gathered with the findings of more documented records.
Today,
a replica of the boat – known as the Red Boat – is parked at the Nanhu
Lake, about 100km from Shanghai, to commemorate the event.
In Chinese, the top party leader is known as zong shuji which means clerk or secretary.
The
term – the lowest among the official positions – was adopted to show
the party’s determination to serve the people and stand alongside with
them.
Nanhu Lake has become a popular tourist spot visited by
nearly nine million travellers annually following a boost of “red
tourism”in recent years.
Red tourism refers to sites with historical and cultural significant to the CPC.
On the rise: A man walks past the Employees
Provident Fund headquarters in Kuala Lumpur. Remuneration of GLC chiefs,
senior management and directors have been on the uptrend following a
transformation initiative to make them more competitive commercially.
Overpaid CEOs and social duties of GLCs set for review
The new government has clearly said that there is a need to review the role of GLCs and the remuneration paid out to their top executives
A GLANCE at one of the annual reports of the country’s government-linked companies (GLCs) reveals that its chief human resource officer earned close to a million ringgit or about RM80,000 per month, last year.
Other senior personnel were also compensated with generous remuneration, with its chief executive taking home over one and the half million ringgit in financial year 2017.
More importantly, this was at a company that had courted much controversy in recent times over allegations of mismanagement and under-performance.
Such a scenario, however, is not uncommon at GLCs, where remuneration of key executives tend to run in the millions but performances sometimes leave much to be desired.
By definition, GLCs are companies where the government has a direct majority stake via their entities such as Khazanah Nasional, Employees Provident Fund, Permodalan Nasional Bhd (PNB), the Armed Forces Fund (Lembaga Tabung Angkatan Tentera) and the Pilgrims Fund (Lembaga Tabung Haji).
In recent years, remuneration of GLC chiefs, senior management and its directors have been on the uptrend following a transformation initiative to make them more competitive commercially.
The thinking behind this is that in order to attract talent – subjective as the definition of that may be – top dollar should be paid.
Some, however, argue that GLCs should in fact prioritise national service a little more.
Universiti Malaya’s Faculty of Economics and Administration professor of political economy Edmund Terence Gomez says GLCs have social obligations.
“What this essentially means is that GLCs cannot operate in a purely commercial manner as they also have to look at the social dimension,” he says. “The GLC professionals have many times articulated that they are doing national service. Going on that alone, one can argue that they shouldn’t be paid private sector salaries,” Terence adds.
And so it is now, there is a disquiet building up among GLCs following the change in government.
The new government has clearly said that there is a need to review the role of GLCs and the remuneration paid out to their top executives and senior management.
In this regard, the Pakatan Harapan government is understood to be mulling over making drastic changes in the appointment and remuneration of key directors at GLCs which include government agencies.
It was reported recently that the Council of Eminent Persons, headed by Tun Daim Zainuddin, who was Finance Minister in the 1980s, has requested details of the salaries of some of the top executives at GLCs as part of the review.
Already, there have been a couple of GLC chief executives who have left and more of this is expected to materialise over the coming weeks.
“It appears to be a purge of Tan Sri Nor Mohamed Yakcop’s boys,” quips an industry observer, referring to the veteran politician who was instrumental in the revamp and transformation of Khazanah which started in 2005 and subsequently, driving the GLC transformation initiative.
UM’s Terence says if the new government is to appoint new individuals, it must ensure that the process is transparent.
“If you are removing these people, who are you replacing them with? More importantly how are you selecting these people?
He adds there needs to be a transparent mechanism in the appointment of this new breed of professionals that will be brought in and what must also be looked into is the kind of check and balances being put in place to ensure governance.
“There should be a debate on these things,” he says.
Economist Yeah Kim Leng believes that a review is timely and appropriate as part of a deeper institutional and structural reform.
“The broad aims are firstly, to reduce excessive payoffs which don’t commensurate with performance and secondly, to address the widening wage and benefits gap between the top and bottom rungs of the organisation,” he says.
Such rationalisation will result in a more equitable salary structure as well as raise the generally depressed wages of middle management and support staff which form the largest number of most organisations, Yeah adds.
Unfair advantage
The role of a head honcho, be it at a GLC or non-GLC, is seldom a walk in the park.
CEOs make critical operational decisions that affect everything from future business directions to the health of a company’s balance sheet and employee morale.
The job generally entails long hours and tremendous pressure to meet expectations of shareholders and stakeholders.
But again, while local GLCs have been key drivers of the economy, one key feature is that they are ultimately owned by the government.
This, some argue, give GLCs unfair advantages such as access to cheap funding and political patronage over their private counterparts.
So, is running a GLC more of a stewardship role as opposed to an entrepreneurship role?
Therein lies the issue that in turn will have a bearing on the remuneration levels of GLC heads.
Minority Shareholders Watch Group (MSWG) chief executive office Devanesan Evanson puts it this way.
“Entrepreneurs have their skin in the game in that there are often the major or substantial shareholder in a company.
“It is in their direct interest to perform as this will be translated into share price appreciation which will impact the value of their shareholdings – this is motivation to grow the entrepreneurial spirit,” he says.
On the other hand, GLC heads do not have their skin in the game save for their limited shareholding through ESOS or share grant schemes.
“If a GLC loses money, the impact on them is limited. They may be prepared to take perverse risks as the eventual loser is the government-linked investment companies or GLICs (and the minority shareholders of the GLC), which eventually are the people who are the members or subscribers of the GLICs.
“In that way, we are not comparing apple to apple and yet, we need talent to run GLCs.
“So we can conclude that, we need to pay for talent at GLCs but it should not be as much compared to what one would pay the CEO of a firm which he started,” Devanesan says, noting that remuneration of some of the GLC heads have risen too fast in recent years.
Rising remuneration is a given, others say, as the government had recruited top talent from the private sector to helm these companies.
A case in point is Axiata Group Bhd, which has done relatively well with the infusion of the “entrepreneurial spirit” under the helm of president and group CEO Tan Sri Jamaludin Ibrahim, who has helmed the Khazanah-owned telco since 2008, they point out.
Prior to that, Jamaludin was with rival Maxis Communications Bhd, a private company controlled by tycoon Ananda Krishnan.
Other GLCs which have performed consistently over recent years include banks like Malayan Banking Bhd
and CIMB Group Holdings Bhd which have expanded their operations out of Malaysia, carving a brand name for themselves regionally.
Under a 10-year transformation programme for GLCs initiated in 2005, companies were given quantitative and qualitative targets to meet as measured by key performance indicators.
Now, the 20 biggest GLCs currently make up about 40% of the local stock market’s market capitalisation.
One of the principles under the programme was also the national development agenda, which emphasised the principle of equal growth and development of the bumiputra community with the non-bumiputras.
Asian Strategy and Leadership Institute (ASLI) Centre of Public Policy Studies chairperson Tan Sri Ramon Navaratnam says the purpose of establishing GLCs to encourage bumiputras to participate in business has largely been fulfilled.
“Now that the bumiputras are on a strong footing in the corporate sector with able leaders who have wide experience, it (GLCs) could be seen as an erosion to the welfare and progress of the smaller and medium-sized industries, particularly those where other bumiputras are involved,” Ramon says.
Having said that, he says although many GLCs are doing well, they have performed well “mainly because of protective policies and monopolistic practices”.
“The time has come in this new Malaysian era for more competition and less protection.”
Benchmarking
Still, if simplistic comparisons are to be made, the CEOs of the country’s two largest GLC banks, Maybank and CIMB for instance, took home less than the CEO of the country’s third largest bank, the non-GLC Public Bank Bhd
last year.
In 2017, Public Bank’s managing director Tan Sri Tay Ah Lek took home some RM27.8mil in total remuneration while Maybank’s Datuk Abdul Farid Alias earned RM10.11mil and CIMB’s Tengku Zafrul Abdul Aziz made RM9.86mil.
Across the causeway, a survey of CEO remuneration of Singapore-listed companies by one financial portal shows that Singaporean GLC CEOs earned 31% more than their non-GLC counterparts in 2017.
Singapore’s Temasek Holdings-owned DBS Bank, which is Singapore’s largest bank, paid out S$10.3mil (RM30.36mil) to its head honcho, while in the telecommunication sector, SingTel’s remuneration to its top executive was some S$6.56mil (RM19.34mil) for the most recently concluded financial year.
By definition, Singapore GLCs are those which are 15% or more owned by the city-state’s investment arm Temasek Holdings.
UM’s Terence does not think Singapore should be a benchmark for Malaysian companies.
“Singapore is a much smaller country and the manner in which they operate in is also different ... their GLCs are deeply conditioned by their holding company, which is the Minister of Finance Incorporated,” he says.
MSWG’s Devanesan notes that determining remuneration is “not exactly science” as there are many parameters to be considered.
Some of the factors to note include whether the companies are in a monopolistic or near monopolistic position and the performance of the GLC heads over the years.
“Based on these parameters, we can instinctively know if a GLC head is over-remunerated,” he says. Over in China, state-owned Industrial and Commercial Bank of China (ICBC), the country’s largest lender by assets, paid out about 63.43 yuan or about RM39mil in total remuneration before tax for the year 2017 to its top executive.
Notably, the Beijing-based ICBC’s net profit’s was at a whopping US$45.6bil (RM182bil) in 2017.
Sources: Gurmeet Kaur and Yvonne Tan The Star
GLC singers sing a different tune
Some officials singing 'Hebat Negaraku'.
Swan song for some after 'Hebat Negaraku' post-GE14 - CEO think video to showcase musical talents
Several heads of government-linked companies (GLCs) have come together
in a heartwarming music video titled "Hebat Negaraku" (my country is
great).
The heads of government linked companies (GLC) who sang a song that later became the theme song for the Barisan Nasional’s election campaign have distanced themselves from the controversial music video.
Those who sang and played musical instruments in the music video titled “Hebat Negaraku” (my country is great) said they did not know the video or the song was going to be a political theme song.
There have been repercussions on the CEOs who appeared in the music video. They have come under scrutiny for making a song that was used as propaganda by Barisan in the last general election.
Three of the GLC bosses in the video have either retired or resigned since the new government took over.
Several more have been speculated to leave in the coming weeks or months but nothing is cast in stone. Sources said this is because most of the CEOs are not known to have campaigned openly for either Barisan or Pakatan Harapan.
“None of the CEOs had a clue it would become a political song. Do you really think the CEOs would have done it if they knew it would become political?” asked one of the CEOs who appeared in the video but declined to be named.
“We have said no to so many things, and we could have easily have said no to this if it was political.’’
Another CEO said he was approached and felt it was “more of a patriotic song and nothing more.”
“At that point in time, we did not think much (of the repercussions). Hebat Negaraku was announced as Barisan’s campaign theme long after the recording was made. We did not know that.’’
Another CEO added: “We thought it was a casual thing when we were approached as some of the CEOs have their own band.’’
It all started when several CEOs were called to be part of a music video and they thought it was to showcase the musical talents of 14 GLCs heads, plus staff members of the 20 key GLCs.
The song is about the greatness, advancement and inspiration of Malaysia. It was released on YouTube on March 22 but has since been taken down.
But fingers have been pointed at the GLCs bosses who made the music video because it became a political video.
Datuk Seri Shazalli Ramly has been said to be the main orchestrator for the group in terms of making the music video. He was also said to be the branding chief for Barisan’s elections campaign.
Barisan lost the elections held on May 9 to Pakatan, which has since formed a new government and is scrutinising all the performance, processes, remuneration and procurement of the government and GLCs.
Shazalli quit his job as group CEO of Telekom Malaysia Bhd (TM) on June 6. Malaysian Resources Corp
Bhd (MRCB) group managing director Tan Sri Mohamad Salim Fateh Din has retired as group MD last week and it was something he had planned to do. Malaysia Airports Holdings Bhd
Datuk Badlisham Ghazali did not get his contract renewed. All three were in the music video.
There is a GLC secretariat that now comes under the purview of TM, which was earlier parked under Khazanah Nasional Bhd. The secretariat organised the making of the music video, according to sources. The CEOs were called to attend a session and within a few hours it was all done with no prior rehearsals.
“When you are called, it could be difficult not to comply since it is the secretariat that called you. We have to oblige but we really did not know it was going to be a campaign slogan. This is really unfortunate that it has turned out like this.
“We were surprised when we found out it was a party slogan but it had already been done and what can we do, we are in the picture,’’ said another CEO.
Not all CEOs who were invited took part in the video. Prior engagements were the reason used for declining to appear. - By b.k. Sidhu The Star
Upholding integrity: Ismail (centre) chairing the EAIC coordination meeting with heads of enforcement agencies. — Bernama
