The cost overrun debacle in Sime Darby in the middle of 2010 precipitated late action by the government to investigate the situation. As the result of the overrun, Sime Darby posted the first ever quarter loss since the massive merger with Golden Hope plantation and Guthrie in 2007. The CEO was promptly directed by the board to take leave of absence and an acting CEO was appointed to “spring clean the house”. And last week we heard of civil suits being slapped on the former CEO and a number of senior officials. And just before that a Sime Darby Manager was charged with corruption.
Now, there are many GLCs administering billions of Ringggit worth of assets, services, contracts and transactions of the country’s rich coffers. Among the major ones are Petronas, Sime Darby, MRCB, Maybank and PNB. Unlike government departments with their enshrined check and balance framework, what is it like in these semi-private sector concerns? Do they have a system which monitors and reports the financial dealings in their organisations? I suppose they have but how independent is this system? Does the CEO have the authority to veto them? Are the people in the regulatory system answerable to the CEO? Are their career advancement determined by the CEO?
Being a major GLC, I am sure on paper there are all the set-ups to monitor the organisation’s financial health but I wonder whether in practice it falls flat and who then monitor this practice? Bank Negara regulates the banking system and who regulates the GLCs? Is it the Ministry of Finance? Does the Ministry have qualified people to undertake these monitoring activities? As far as I could see, those civil servants in the Ministry of Finance are made up of PTDs or Pegawai Tadbir dan Diplomatik who are arts graduates and they appear to lack technical expertise. That is why many of the government contracts are lopsided favouring the contractors rather than the government (ie the rakyat). I wish some PhD students would study the government contracts and prove that my general statement is wrong.
Corruption is not only about giving and receiving money. Corruption entails the use of one’s position and power to act such that through such actions, financial losses, unfairness, injustice, shoddiness, mediocrity and carelessness are the resultant outcomes. In the Sime Darby debacle, apart from other effects, the Malaysian minnow investors through PNB (National Capital Ltd) which is a major share holder of Sime Darby were summarily shortchanged.
There is no doubt that corruption is common in GLCs (Government-linked corporations). Good leadership would ensure that they are minimised. A risk management section should be established to monitor the organisation and what is more important is to train staff to say no to corrupt practices. Anti-corruption attitude should be internalised to the point of being indoctrinated.
The cost of doing business rises in countries which let corruption fester. It reminds me of an engineer who works in a private software company that wins a contract to maintain a system in one of the major GLCs. He intimated to me that the cost of the contract would have been lower if not for the demand of the concerned GLC’s officers for regular free trips by air for them and their families. Now where does the money come from? This GLC is really a major one so I suppose this corrupt practice is a tiny drop in the ocean.
The same GLC also would ask whether prospective candidates for vacancies in the organisation know anyone who works in the GLC, it seems they would only appoint people with relatives to work there. This is a form of corrupt practice because you can never really get the best to work instead a mediocre candidate with connection would do. I hope an investigation would one day be carried out to stamp out this scourge.
Corruption in any guises is despicable. Mechanisms in GLCs should be strengthened to tackle this problem. Self regulation can only be effective if every now and then the leadership cracks its whip and redesign the system to further promote and sustain ethical and non-corrupt practices. We need not wait for the Medusa to rear its ugly head and act after the event. Pro activeness against all kinds of infractions and fraud would serve to shield the organisation from predictive bad outcomes.
Now who regulates the financial matters of GLCs in Malaysia so that problems can be detected earlier? Did someone say the Board of Directors? Hah… Just look at who are in those Boards of Directors of GLCs… old and tired retired senior government servants are among them, these guys would have to be sent for retraining in detecting financial frauds. Otherwise they can be easily duped by those professional “corrupt” management men and women with engineering degrees, accounting and economic degrees etc. And I also heard those board meetings are often followed by sumptuous meals…
Figuratively speaking, you need a thief to catch a thief!