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Review the criteria for appointing directors of GLCs
Published on: Sunday, January 08, 2017

By Datuk Akhbar Satar
MOST are aware of the recent statement by the Auditor-General of Malaysia Tan Sri Ambrin Buang on how government agencies have recovered an estimated RM2bil in follow-up actions after audits conducted by his department.

The recovered amounts could only be the tip of the iceberg, given these audits were conducted on a limited sample size.

The audit relates to government agencies and government-linked companies (GLCs) and concerns their heads, in particular the board of directors. The Government’s investment in GLCs via the rakyat’s money should not be mismanaged or misappropriated by the handful of unscrupulous officials who have betrayed the trust placed upon them.

While we are thankful to the AG and his dedicated staff, we should be appalled at the failure of the heads of department in government agencies and board of directors who are appointed to the GLCs to discharge the duties entrusted to them by their stakeholders, namely the rakyat.

Leakages and fraud occur due to poor corporate governance being practised and the failure of boards of directors in effectively guiding and overseeing the performance of their management. Company directors owe a fiduciary duty to act only in the interest of the company and to discharge their duties by using reasonable care, skill and diligence.

Establishing the right tone at the top is much more than having a compliance framework – it also includes fortifying the organisation’s reputation and relationship with its stakeholders. Honesty, integrity and leadership by example are important criteria for a company’s credibility and success.

The “three lines of defence” model which is generally adopted and implemented by companies, including GLCs, seems to indicate that the management control, risk control and compliance, independent assurance from internal auditors, together with having chief integrity officers, has failed to function effectively.

Strong monitoring and coordination by the board of directors would have helped identify and overcome this failure.

The time for the Government to review the criteria for appointment of directors to GLCs, and by extension state-owned enterprises, is long overdue. These directors should strictly meet certain mandatory criteria before being appointed. These include being competent, dedicated, knowledgeable in their respective industry, experienced and most importantly practising the highest ethical standards of integrity and probity.

Anyone, including politicians, who lacks any of these criteria should not be appointed.

The nominated persons should then be vetted and cleared by the Malaysian Anti-Corruption Commission before their appointment as directors.

The objective should always be about getting the right person for the right job and not rewarding via political patronage. More so when these entities operate using the rakyat’s money.

The appointed officials, including directors, if later found to have failed to discharge their duties responsibly, or to be involved in any corporate scandals, should not only be removed immediately from their posts but also be subject to the strongest punishment allowed by law for having breached the rakyat’s trust.

Sending a firm message now is vital for the Government to show its sincerity and seriousness in addressing rampant leakages and wastage of public funds.

Datuk Akhbar Satar

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