The question of ethics and integrity
THE unfortunate episode of Felda Global Ventures (FGV), which is an off shoot of Federal Land Development Authority, has raised a host of issues on both corporate and public governance in the context of government-linked companies (GLCs). Such issues have also cropped up in other GLCs such as Tabung Haji, Tenaga Nasional, Proton and even cooperatives.
The management concept of GLCs are noble and novel, operating within the safety net of government yet free to operate as a normal private sector corporation. The purpose being to allow for economic activity unfettered by government bureaucratic regulatory control that would usually stymie corporate enterprises. It was envisaged that such enterprises that combine best practices of the private sector and the security offered by the government (Ministry of Finance) would result in economic gains both for the shareholders and government.
Barring any cataclysmic economic events as a result of global financial disasters, these GLCs should be able to withstand any normal economic ups and downs without incurring much financial loss, provided the management exercised prudent and sound measures and investments that have passed the risk compliance assessment.
More important these GLCs should be headed by professionals without vested political interests. And their appointments should not be based on political lineage or connections. It is imperative that these GLCs be free from political encumbrances and operate as entrepreneurial entities that observe strict and proper corporate governance based on company’s laws and acts and ethical management principles. But such a pristine situation seldom exists in reality because the noble and theoretically economically sound aspirations are not consonant with the management styles of these GLCs.
The predicament of FGV is of utmost concern for the nation because it not only involves the livelihood and future of the settlers but its international exposure to property and plantation sectors, which puts at risk billions of ringgit. It also affects the nation’s image and reputation.
Therefore, the government is rightly concerned with such injudicious use of the company’s funds for high risk investments without going through proper and astute risk assessments. And the findings of a former minister Tan Sri Idris Jala, who is the chairman of Mampu tasked to investigate the financial troubles of Felda and its subsidiaries such as FGV, testify to the need of a major review of corporate governance in this GLC.
Pursuant to this finding, there is a need to set up a team of corporate financial and management experts to thoroughly investigate with incisive analysis to determine the malfeasance and management irregularities and financial haemorrhage.
What is strange is that a management style, which does not follow best practices in corporate governance, was left unchecked and unnoticed by the main shareholders. Was it because they had complete trust in the management team that there was no need to monitor the running of the company? Or was it because of vested expediency that caused these irregularities to be overlooked?
In any corporate management there should be a built-in element of healthy scepticism for check and balance to ensure compliance with good governance ethics. Reasonable and incomplete trust should be extended to the corporate management team.
Without this protocol of scepticism and check and balance, the carcinogenic ailments of the company may not be discerned until it becomes cancerous, without hope of remission. By then it would be too late to salvage the financial standing and reputation of the company and no amount of damage control would alleviate its woes.
This exercise of revamping the company and the philosophical rhetoric of reconfiguring its management and financial structure may temporarily allay fears of the common man who is not versed in the intricacies of corporate governance and usually takes as gospel official pronouncements on the state and future of FGV.
For the long-term, there is a need to institute best business practices based on ethics and integrity and to be independent of sectarian interests. Otherwise, FGV and other GLCs as well as other government agencies will be riddled with mismanagement, misappropriation of funds and other misdemeanours that bode ill for the prosperity of the nation.
Datuk Dr Mohamed Ghouse Nasuruddin is an honorary fellow at the Centre for Policy Research and International Studies at Universiti Sains Malaysia. Comments: letters@thesundaily.com