A local business paper recently reported about a retired senior civil servant being appointed as director of a listed company.
With this appointment, this ex-civil servant now serves on the board of four listed companies. He also holds a senior position in another organisation.
This report made me ponder on the ethics and criteria involved in appointing a board member of a listed firm.
Any rational person would agree that a director cannot effectively and sincerely serve five firms simultaneously. Having to juggle the time and energy between so many companies would not allow any director to give his or her best to any one company.
I find it difficult to comprehend how any honourable person would find it in his or her conscience to serve on the board of more than two companies at any one time. What can be said about the moral rectitude of directors who sit on so many company boards?
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So, what motivates a director to sit on so many boards, if not pecuniary gain?
What is the justification for the appointments of those who are not qualified and who don’t have relevant experience in a company’s core business activities? Shouldn’t there be more stringent conditions imposed for such board appointments?
As a minority shareholder of a few listed companies, I feel duty-bound to read the companies’ annual reports – after which I raise my concerns at their annual general meetings.
Over the last two years, however, these annual meetings have been held online, and this has denied me the opportunity to ask spontaneous supplementary questions to my original questions.
Often, I can see from the body language of the directors the discomfort caused by some of my questions. Besides asking pertinent questions on the financial aspects, board appointments and directors’ renumeration, I also raise trivial issues which I consider relevant.
At one company’s annual meeting, I asked why the firm’s annual report only highlighted board members and senior management staff but not the contributions of ordinary staff members. Nor were there any photos of the latter included in the annual report.
The company chairman thanked me for raising this matter. He said the firm had noted my observation and would do what was necessary for the following year’s annual report.
I know three ex-civil servants very well who now serve on the board of three banks. One of them is now a chairman and the other are two non-independent directors.
But none of them have any experience in banking, finance and insurance. Neither do they have sound knowledge of the Banking and Financial Institutions Act 1989 (Bafia). They are also not well versed in current important areas like the digital economy, cyber security, artificial intelligence, automation and robotics.
So, what is the justification for their appointments to the boards of these banks?
When I pointed out to one bank that some directors are not equipped with the necessary knowledge, the response was that a strict vetting process takes place prior to the appointments.
I vehemently disagree with this assertion, as their blatant lack of experience or expertise should suffice for an outright rejection of their appointments.
Why can’t these banks appoint younger, dynamic and more capable members to their boards? Appointees should have essential experience and relevant credentials in critical areas. The best interests of shareholders would have been served if the appointments were based on merit rather than other considerations.
Then there is another bank (of which I am also a minority shareholder) where nearly all the board members are senior citizens (two of them are nearing 80).
Are they so indispensable they cannot be replaced? What is the succession plan of this bank? I raised these questions at the bank’s annual general meeting recently but received a disappointing and evasive response.
Listed companies are morally obligated to inform shareholders about the rationale for every board appointment. The onus is also on shareholders to ask in-depth questions about the appointments of those without relevant credentials.
The Minority Shareholders Watchdog Group should be notified of all appointments and query companies prior to any appointment, if it deems it necessary.
The group should also ask listed companies about the excessive renumeration paid to non-independent directors. Many of these board members are part-time directors who also sit on other boards.
The normal response to my query on this is that directors are paid according to the industry norm.
I told them this response was unacceptable. I pointed out that chairmen, managing directors, CEOs and board members of companies in Sweden are paid far less compared to their Malaysian counterparts. Neither are the top brass of these Swedish firms given perks, such as a car and a personal driver.
No one responded to my comparison.
I have always believed that one director should only be permitted to serve on the board of at most two companies. I hope the Companies Act 2016 would be amended to this effect.
The mandatory retirement age for a director of any listed company should be 70 – except in extenuating circumstances where the director has peerless expertise in a particular area.
A director’s fundamental responsibility is to use his or her experience and knowledge in the best interests of shareholders. Accountability and integrity are critical virtues for all directors.
I know of many capable Malaysians who can serve on company boards – but they are denied the opportunity. Why? Because they lack the connections and cannot pull any ‘cables’.
Often, appointments are based on who you know – rather than the knowledge and capability you have, how much you can contribute and whether you are worth your salt.
Back to the recently appointed board member who has zero experience in the core activities of the company. All I can say is that this appointment is a travesty of justice.
My friend in Bangsar has over 30 years’ experience in the relevant field, and he would have been a suitable candidate for company director. Regrettably, he has no connections with the big wigs in the corporate sector to be appointed a director.
What a waste of talent and what a shame, when we think of all those like him who could have contributed so much to the corporate sector.
When we witness such charades taking place, it is not surprising that we have such a large brain drain from the country. When such practices continue, it is no wonder we often face a dearth of talent locally.
It is a blemish on our country, and we bow our heads in shame each time it occurs. If the public and private sectors lack meritocracy, then it will be detrimental to future generations.
Sadly, we can only be perceived as a country where mediocrity prevails, one which has missed the opportunity to realise its true potential.