Pic 01: Corporate Governance Pillar
Birth of United Kingdom Corporate Governance
Sir Adrian Cadbury was concerned with the unfettered powers vested in Executive Directors. Indirectly referring to the Maxwell Scandal where the CEO was also Chairman and dominates the Board of Directors. The resulting effect was siphoning employees hard earned pension fund for his own benefit. A case of Agency Problem with insufficient safeguards. Hence the Cadbury Report requires the principles based compliance that Board is to ensure the independent monitoring of CEO by Chairman.
However, many companies pay lip-service in failing to appreciate the "spirit" of the Code. These Malaysian Companies and by extension the Malaysian governmental administration has many conflicts of interests.
Case Study
For instance, TA (M) Securities Berhad former CEO Datuk Tiah was convicted of corruption and imprisoned. He was barred from holding any executorial director position for 10 years. During that period, his wife Datin Tiah held the CEO position. 13 years later, Datuk Tiah is the Chairman. Would there be an "independent" evaluation of CEO by a spouse, ex-convict Chairman? What is the integrity of Chairman notwithstanding the fact that he has passed the 10 year bar period?
Malaysian Administrative Governance
If you think this local company has an 'iffy' governance issue. Well magnify that 'billions' of times, yes to "billions of lost Ringgit"! Independence is the key pillar to effective governance.However if politicians or senators have indirect control of police, Ministries on Home securities and media licensing, laws to muzzle whistle blowers media, almost dictatorial control of Malaysian Anti Corruption Corporation (MACC), then this gives rise to weak governance.
Poor governance arising from lack of transparency and accountability:
Government should be gravely concerned and explain the scandals and the leaks involving billions of ringgit which have underlined decades of 2/3 majority rule at Parliment.
The missing billions, said Opposition PKR supreme council member Tan Kee Kwong, were public funds and must be explained even before Najib can begin winning the rakyat’s confidence.
Tan said this while debating Government's speech was always “prioritising the rakyat and helping the poor and needy”. (there should be greater effort in communicating with the public)
Pic 02: Does the country have the expertise to build own Military Navy Ships? Does the costs justify? A case of Opportunism under transaction cost theory!
Pic 03: Is it that costly, a tank at RM30million? Note that a passenger plane (yes, the one that flies) costs only RM45 million.
Tan drew attention to a litany of scandals which has ripped apart the Malaysian economy, leading to its current debt-ridden state.
He recalled how in 1998 during the economic crisis, finance minister Anwar Ibrahim was sacked and replaced by Daim Zainuddin.
According to him, Daim had at the time awarded a RM5.2 billion contract to his crony company PSC Shipyard Bhd to build OPV (offshore patrol vessels).
The Public Accounts Commission (PAC) later discovered that the finance ministry had issued a cheque for RM1 billion before the OPVs were completed.
“During the PAC meeting, we were shocked to hear that RM3.8 billion had been paid out by the ministry although not a single OPV had been sent to the navy (Royal Malaysian Navy).
“Then we questioned the defence ministry secretary-general about the missing RM600 million, and he said it was used to pay off the debts of another one of his (Daim’s) projects.
“I understand the OPV contract has since been given to another company to complete the job and it has cost the BN government RM7.5 billion in total, an additional RM2.3 billion.
“Is this what Najib meant by 'people first'?” asked Tan, the former deputy minister of land and cooperative development.
Major scandals over the years
Tan also questioned the setting up of the Terengganu Investment Agency (TIA), which was involved in administrating the flow of “wang ehsan” funds from Petronas to the Terengganu.
The TIA received profits of between RM600 million and RM700 million a year in commissions. “I was given to understand that for a large amount like this, a 3% commission is usually paid.
"In this case, the commission paid was 12.5% and the commission received on the balance -- RM3.5 billion -- is even higher.
“Wang Ehsan should be used to to help the poor in Terengganu, not for other activities and should in fact be used to secure bonds," said Tan.
“Why was there a need for a 12.5% commission payout? Is the investment in Kazakhstan safe?" he asked.
He also recalled the major scandals involving the BN government, including the RM4 billion Hong Kong BMF scandal, the RM15 billion Perwaja Steel fiasco and the RM10 billion PKFZ (Port Klang Free Zone) affair.
Also, the time when MAS shares were bought at RM8 apiece when in fact their market price was only RM3.5 and the direct awards of contracts for construction of schools and computers worth RM10 billion, and the RM8 billion purchase of military tanks.
The price of the tanks was RM500 million but what the government paid out was RM30 million for each unit.
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Caution: The article above is biased coming from opposition political party that question the integrity of present government. As readers, we should take a pinch of salt of its allegations as in Court its all about evidence. What should irk Passive stakeholders like voters and community are why there aren't sufficient transparency and accountability in managing public funds?
But note that Opposition party is indirectly complying with Cadbury's Report as a role of "chairman" evaluating the role of "CEO present government". Thus complying with the spirit of the governnance code rather than mere Box-ticking approach.
"Biased" Source from an opposition political party: http://www.freemalaysiatoday.com/fmt-english/politics/barisan-nasional/7904-explain-lost-billions-before-touting-people-first-slogan
Other links:
TA Enterprise Berhad, 2010, Official website http://www.ta.com.my/tae/
Securities COmmission, 2002, SC acts tough on errant PN4 directors; offenders will be dealt with, www.sc.com.my/eng/html/resources/press/pr_20021212.html, 12 December
5 comments:
Invitation : ACCA Students
Your comments are good practice for exams which usually are case study centric.
Feel free to comment but with code of decency ethics. You can criticise, analyse, ostracise but no vulgarities please.
I can start the ball rolling with:
1. What the country can do with
RM40billion?
2. Why lacking in transparency on handling of Port Klang Free Zone case? Its worth RM10billion, don't the public deserve to know?
3. How to improve governance in Malaysia?
Happy debating
Marcus
I'll try to keep it short and simple.よろしくお願いします。
1.Many many things can be done as long as all the big fat contracts are not awarded to crony companies.I think we can save a lot of taxpayers money doing so.Open tender would be great.
I would suggest using the cash to improve our internet,public transport or maybe just plain use it to strengthen our currency since we are printing so much money nowadays(stupid stimulus packages)
2.Every sen should be ACCOUNTABLE!!!However the problem is that what if the investigation somehow found out that the higher ups are involved in it(like our great pm etc)?Prosecute our dear leader?
This kind of daylight robbery had occurred many times and maybe we should look at the root of the problem and fix it?
3.The question we should be asking is...what governance?It seems that our so called leaders always get away one way or another.The only thing threatening them is the one people one vote where we can vote them out...I hope the rural area people can wake up to reality and think before you vote.
Some suggestions to improve governance:
-Elect a president to oversee the performance of our pm and other ministers.Whoever this is better be independent so maybe change every 3 years?
-Why the pm and deputy are holding 2 portfolio?I think there's too much power on their hands.
-Restructure the whole bloody MACC to be truly independent like ICAC in Hong Kong.It is just like a paper tiger with no power at all.
-Go and send the parliament members to attend public speaking classes!!!Their debates are such a waste of time.Go to youtube to verify and you will know that they are talking like schoolchildren.
-Stop the flipflop decision making!!!Just take the recent gambling license thing for example.Shouldn't the government get all facts right before giving a concrete answer?Just when announce want to give the license and then rakyat complain then take back again and blame the rakyat for it?If so why the hell the rakyat need government?
-Why is there not a SOFP,SOCI and cashflow statement for every department in the government and posted on the internet as it is our taxpayer money?Are they not accountable to us?You can keep wasting billions and billions of our cash and cannot even prepare a few audited accounts?
Of course i can go on and on but really if something is not done then our country is doomed!!!
（;´Д‛） (=X_X=)
A country with RM40billion.
We can use it to expend our human capital. As we are rich with resources why dont we capitalized it to our advantage. As we have alot of talented people in Malaysia just that one one to guide and nurture them.
We should use it to expend and connect the urban areas as well rural areas to big city. With a good infrastructure with high speed bullet train. Logistic will be safe and people have more way and means to market their product to big city as well as to export out.
We should encourage awarding innovation and creativity camp. Award great and innovative ideas and implement it. Such as harness our sun power as we are have sun all year long.
We can also use the fund to make more power using water. Even it left a great footprint behind. But with control and innovative ideas. We can able to minimize it. We have no use of nuclear power as we can utilize our natural resources to our benefit.
About sugar, we are net exporter for sugar and gas and oil. Why dont benefit the people and introduce a new system where with more ppl export out. The tariff will be cheaper. As we can gain overseas currency to our country and not stuck in our country.
And also we must also open our policy to be open free market with great governance. On how to implement good governance. I think of this idea which not used by others before. Why dont we have intra world organisation. With other country with other culture and set of governance monitor our agency system. And other monitor others. Meaning no one country monitor each other as no you scratch my back and you did the same.
Maybe can disposing off the current system of political. We can have a more robust and more efficient system to have a greater governance. As too much governance and one shoe fits all doesn't help much as well as it will tend to fail in the end. So best way is dispose current money policy and have one currency in the world. And one big body to regulate it. With the current system, we will tend to have disorder with greed in mind with each other want to be dominant for i.e US want to be taiko in the world yet they can't help them self.
With RM40billion also, we can setup fund for more eco friendly product and use less dependent to fossil fuel product. With this, we can be able to diversify to overseas market as well.
Transparency is important to show the public of how the public fund is being used.
The minister as well as the government servant and everyone in government either linked directly to government or indirectly including spouse and children should declare and post their earnings and net worth in malaysia as well overseas account. Its being practice by current obama administration.
They should also practice Fairness. Even though its in the constitution. But all of us are borned in Malaysia. What make other races are different. This contradict what they say why more than 300,000 malaysian went overseas once they have their professionalism is because they are not fair to all but to their own crony only.
Integrity. They should uphold the most uphold honesty. What wrong with hiding facts and keep on attacking on opposition. They should work for us. Not for their own pocket and benefit for next election. Forget about the submarine or the oil ship. Its ridiculous to buy aid ship for RM2.2billion where we can even feed our poor. no use of helping other nation when we can't even help our own people.
Alot more can be written but this will be more than enough as can be non stop. Thanks Mr Marcus, your class is the best ever.
# Guest "again and again...corporate governance wouldn't successfully influence a company as it's a "spirit".. too much restrictions and rules & regulations to"
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# Guest "and hopefully.... their hunger for power and money would stop at a tolerable range ??"
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23:46 17/7/10
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# Guest "complied with....no one loves to be controlled ... especially the executives...we could only hope that they're all still have their "heart" ...."
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40 billion? wow! huge amount of money. 1st thing came to my mind was, develop nuclear energy? joking only la, Sir, 40 billion not enough for nuclear energy also la.
what i concern is actually, our technology. as what Sir today during F8 classes, bullet train in China. i am actually waiting bullet trains to come M'sia, hopefully before i die i can see it in M'sia la.
And i admire Japanese Toilets? i was told their toilet can analyse excreta, then tell u whether u r eating the right and healthy food or not, which part of ur body requires more care and avoid what kind of food.
u see, we are always told, M'sia killer diseases are heart attack, diabetes etc. and some malaysians are so stubborn and conservative, not willing to go for a full body check-up annually. having this kind of advanced toilets, can help "rakyat" a lot leh, as people are the precious capital of the country, shouldn't government take some cares to improve/ increase our awareness to take good care of our health?
i am not sure whether flood is still a issue or not. if yes, i hope government will do something.
now running out of ideas already, so Q2 and Q3 i will skip it. TQ
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