Business Commentary

Replacing GLC CEOs: Financial constraint or politics?

June 27, 2018

By Salahuddin bin Hisham

“GOVERNMENTS come and go, but civil servants are forever, and the good old machine runs on as before.”

That is a quote from the BBC sitcom, “Yes, Minister”.

In Malaysia, the good old machine not only refers to civil servants but also the management of Government-linked companies (GLCs).

The current talk of Chief Executive Officers (CEOs) to be sacked or made to resign due to their high salary package does not sync well with the age old practice for continuity in the running of government or corporations.

It is certainly a deviation from the change brought about by two administrations of the previous government to retain and attract the best brains in the country and some into GLCs.

The reason being painted by the new government is financial constraint.

There will be agreement and disagreement to the controversial claim of government debt standing at RM1 trillion, but the issue with top management pay package do make for an interesting discussion.  

Politicians are elected and some made into ministers to put in charge of ministries, but the actual running of government and GLCs should be left to career civil servants and professional managers.  

They serve to provide continuity in government policies, ensure delivery in policy implementation, and day-to-day operations.

The new government is determined to cut government expenditure, downsize the civil service, and destined to pursue deflationary and contractionary economic policies. Any change should be done in the least disruptive way as possible. So the plan to slash the salaries of GLC top management should not be done in haste.

If an organisation pays their top executives Singapore-level salary scale but contributes less than one per cent annually to government coffers, by all means, the Trump-style “you are fired!” is justified.  

The stream of resignations, sacking and early retirement of civil servants, and few GLC top management beginning with 17,000 contractual government staff lay-offs indicate it is more political than economics.

A name list of 15 top CEOs and chairmen of the Board of Directors was bandied about on the same day the name of Permodalan Nasional Berhad Chairman, Tan Sri Abdul Wahid Omar was tossed into play by both online and mainstream media.

A news report, quoting unnamed sources said that the name list could be as long as 100.

One report spun a story that Wahid’s time was up due to his expressed strong views against the termination of Goods and Services Tax (GST) to a member of the Council of Eminent Persons (CEP).  

The report seemed to be crafted from his actual view, as the former Minister in charge of the Economic Planning Unit involved with GST implementation, to defend the policy during the election campaign.

There are other many meetings between other CEOs and members of CEP that do not check out and detected as BS.

The political motivation is obvious when a former member of Parliament tweeted on the six figure salary of a former telco CEO in early May.

Two weeks ago that CEO resigned. It is obvious that the media is part of a concerted effort to pressure targeted CEOs to resign voluntarily.

The reason to get them to resign is likely to be cases of mistrust. Salaries could be a concocted excuse to replace them with persons trusted by the new government. There is also the suspicion that the purge is racially motivated.

Corporate cleansing of any political affiliation to the previous government is a political reality.

There could be some truth in the claim that 53 GLC CEOs were singing songs of praises for Datuk Seri Najib Razak, his economic and business policies during the election campaign.

These professionals should not be penalised for serving the government of the day. It also happened in Selangor and Penang and are accepted norm during the Barisan Nasional government under the administration of Tun Dr Mahathir Mohamad.

Most of the CEOs are not members of any political party. Politics or personal affiliations should not be the prime consideration. Judge them for their performance and adherence to corporate governance.

Dr Mahathir managed to set Malaysians’ mind to aspire to be a developed first world nation but unfortunately, the political culture has  remained third world.

As recent as last week, a leader of the new government explicitly expressed expectation on civil servants to be loyal to the government of the day. Voices can be heard to demand civil servants with dissenting partisan alignment to resign.

When the dusk settles, the high salary packages are likely to resume again.  

As one former GLC CEO told yours truly, their pay packages were put together by an international Human Resource consultant and were done objectively.

They charted out the CEO’s role and responsibility, the list of companies under their management, revenue and profitability, and key performance indices to be compared with the salary packages of other executives in the market – locally and abroad.    

It is also regularly reviewed.

One cynical reply to this explanation of high pay is a collusion between the pool of GLCs’ Director appointees and GLC CEOs to feather their own nest.  The maximum basic monthly salary of RM200,000 suffice and more in the form of performance bonus.

They argue that GLC CEOs are salaried workers and do not assume risk as do business owners  does, thus do not deserve the multimillion ringgit salary packages.  

Politics and abuse of power aside, the intention behind the policy then to offer competitive numeration was to retain the top executive within the country, and meant to be at par with the market to attract the best talents.

It was part of the GLC Transformation program to see companies being run well with high standards of corporate governance, and best practices in transparency and accountability. Before taking such a drastic action, it should be determined whether the CEOs have failed to generate the desired returns.

There are many views that insist the success of GLCs is largely due to its association with the government, thus CEOs do not deserve to be paid top dollar.

Well, you pay peanuts, you get monkeys.

The CEOs the new government will hire are likely the conservative, pen pusher and non-creative play-safe types.

Instead of success, they will not perform, likely be corrupt and end up into a string of failures!

 

 

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