1. starbizweek, saturday 12 February 2011 sbw
VIEWPOINTS
Politicising the board
Should ex-politicians be barred from board roles?
M
ADELEINE Albright. John
Major. Margaret Thatcher.
Tan Sri Leo Moggie. Tun
Musa Hitam. Believe it or not, they
share something in common – they
are all retired politicians who have
bowed out from the executive
branch of the government and poli-
tics to join the Corporate C-Suite.
In fact, there are a lot more of
them. According to a global execu-
tive search firm, if you were to scan
the Fortune 1000 today, the number
of public figures on boards has risen
substantially.
Just what is it about ex-politi-
cians that make board recruiters
dash for them? This – connections,
expertise (legal and regulatory),
name recognition and some even
say “fairy dust” (a dressed-up
euphemism for residual political
clout).
Clearly, a politically-minded
director has its benefits. That’s not
lost on the world’s second largest
company Apple. In 2003, it appoint-
ed former US Vice-President Al-
Gore to its board. “Al brings an
incredible wealth of knowledge and
wisdom to Apple from having
helped run the largest organisation
in the world – the US government,”
Apple’s Steve Jobs had said.
Wouldn’t that be enough to
render the argument on whether
retired-politicians ought to fill up
board seats in companies futile?
Truth is, the criteria of a company’s
board composition should rest
squarely on competency, capability
and track record. The same rules
should apply, be it for an ex-politi-
cian, ex-regulator, lawyer, account-
ant (lawyers and accountants
appear to dominate the share of
professionals on boards) or any
other individual for a board role.
In Malaysia, as in many parts of
the world, such appointments tend
to draw significant public derision.
Perhaps because it lends credence
to the nagging suspicion that in
business, political connections
count. Reality check – they DO.
This very topic took centrestage
over the week when National
Economic Advisory Council (NEAC)
member Datuk Dr Zainal Aznam
Mohd Yusof remarked that corrup-
tion could be curbed if politicians
were to be barred from holding
senior positions in companies. Was
it a sweeping statement or was he
talking specifics as he had also
referred to the appointment of Tan
Sri Mohd Isa Abdul Samad as Felda
(Federal Land Development
Authority) chairman effective
January this year?
“Power corrupts. To put a politi-
cian in the iconic successful world
of Felda is a double blow ... It’s a sad
day ...,” he had said.
A day later, Prime Minister Datuk
Seri Najib Tun Razak shot back,
saying that the Government will
appoint any individual it feels is
capable of holding positions in GLCs
(government-linked companies)
and it would not deny politicians
the opportunity to head GLCs: “We
do not have such restrictions. We
will make appointments based on
the ability of the appointee, wheth-
er he is a corporate figure, former
government officer or ex-politi-
cian.”
The Premier is right, of course, on
that count at least. Potential board-
room candidates should be judged
based on their merits and capabili-
ties. No buts. (Whether or not Isa
Samad, ex-Chief Minister of Negri
Sembilan whose Umno member-
ship was suspended for three years
till 2008 on suspected money poli-
tics, has the “ability” to lead Felda,
is a separate argument, of course).
Status check. How “pervasive” is
this trend in Corporate Malaysia?
Hardly worth flinching, if a survey
by a professor from Universiti
Malaysia Terengganu (posted on the
Maicsa website) is anything to go
by. Having scrutinised data from a
sample of 84 non-financial top 100
Malaysian firms in financial year
2007/08, he discovered that direc-
tors with public sector experience
make up about a quarter of total
board appointments.
Of this, retired politicians make
up only 3% of total board appoint-
ments. “Retired politicians and
government officers are under-
standably found on the board of
GLCs or family-owned companies
which are involved in government
projects,” he pointed out.
Based on the G20, a group of 20
(19 now, following a merger) most
significant and largest GLCs, none
but two have ex-politicians as
chairman – Tun Musa Hitam of
Sime Darby Bhd and Tan Sri Leo
Moggie of Tenaga Nasional Bhd. The
boards of five of these GLCs are
chaired by ex-bureaucrats who
have served in the upper reaches of
the Government.
Bear in mind that the pool of
candidates for non-executive as
well as independent directors is
believed to be shrinking on the back
of rising demand as the call for
better governance gains momen-
tum. Good people with the right
knowledge, experience and credibil-
ity for directorships are not easy to
come by.
It may be unfair to ban those who
have served the public as politicians
from providing useful service by
being on the boards of companies.
The problem arises where there’s a
perception that the administration
is steeped in corruption. As such,
retired politicians, more than
anyone else, may have to match up
to higher expectations in carrying
out their fiduciary duties and bring-
ing value to the businesses with a
constant eye on governance.
Remember, one director does not
a whole board make, although in
reality, there are exceptions. The
entire board and its members are
involved in the decision-making
process. This also means that when
the ball drops, the entire board
should be accountable.
Critics of ex-politicians taking on
board roles are concerned that it
leaves much wiggle room for abuse
and button-pushing which could
override true-blue business acumen.
And they are right – such moves
potentially court governance risks.
But these risks are not isolated to
boards with ex-politicians alone.
Instead, they ought to cover the
whole gamut of listed companies on
Bursa Malaysia.
There are several companies in
Malaysia that are labelled as “politi-
cally-linked”, although the numbers
have dropped significantly over the
past decade. They do not need to
have the presence of ex-politicians
on their boards and most in fact,
have none, but there exists implicit
political connections.
Then there are others who have
ex-regulators on their boards. Tan
Sri Munir Majid, who was once a
referee of Corporate Malaysia as the
boss of the Securities Commission,
is now chairman of Malaysia
Airlines. The country’s longest-serv-
ing Prime Minister Tun Dr Mahathir
Mohamad is advisor to two major
national companies – carmaker
Proton Holdings Bhd and oil giant
Petroliam Nasional Bhd (he holds
no board positions in these compa-
nies). Given their experience and
knowledge, are they better able to
add value to the businesses? Or
should they be banned from such
roles based on potential governance
risks due to past clout?
Ex-politicians, no doubt, are
better able to exploit their contacts
with their board seats. But as Lord
George Robertson, a former UK poli-
tician who took on a series of
boardroom roles years ago and had
come under scrutiny for that had
shouted back in his defence – “But
who doesn’t trade on past connec-
tions?”
l Business editor Anita Gabriel
wonders if ex-politicians suffer from
“Limelight Deprivation Syndrome”
which is what makes them jump to
take up boardroom roles. She also
wonders if there should be a cooling
off period ...
ANITA GABRIEL
anita@thestar.com.my
SIDEWAYS
Boosting trade ties can reduce poverty
WE live in a world where we are
more connected than ever before.
The UK is linked to Malaysia
through ties of business, education,
friendship, and a wealth of common
interests.
These international connections
offer huge potential for growth in
trade and investment, as long as
markets are open and countries are
able to trade freely with one anoth-
er.
The fastest growing countries
tend to be those with the fewest
trade barriers. So to realise our
potential, we must commit to open
markets globally. We must not slip
back into protectionism.
That is why the UK Government
published on Feb 9 its Trade and
Investment White Paper: an ambi-
tious strategy to nurture interna-
tional trade and investment rela-
tionships, strengthen the multilat-
eral system, build up our domestic
business environment, and enable
developing countries to build their
own paths to growth.
The Paper demonstrates that
trade and investment are critical for
the UK to achieve strong, sustaina-
ble and balanced growth in the
future. As a strong trading nation,
Malaysia will be in a similar posi-
tion. And while Malaysia’s
Economic Transformation
Programme (ETP) will no doubt
boost domestic demand, trade will
remain an important contributor to
GDP. Important investment projects
such as Iskandar will encourage
more international companies to
base their regional operations in
Malaysia.
The Paper makes the case for:
open markets and the dangers of
protectionism; removing trade and
investment barriers and improved
market access for UK business with-
in the EU and beyond; helping to
conclude the Doha Development
Round of trade talks in 2011; work-
ing to strengthen the WTO;
supporting early conclusion of
priority EU Free Trade Agreements,
including one with Malaysia;
supporting trade and regional inte-
gration in Africa; and working with
G20 members towards these goals.
Our most immediate task is to
finalise the Doha trade negotiations.
This historic agreement, once
signed, will boost the world econo-
my by £110bil. So we must all move
quickly to make 2011 the year that
the Doha trade talks are finalised.
Momentum is building. We will be
working on plans and roadmaps to
meet this goal.
And we are sure that Malaysia
will share many of our ambitions
for a far reaching and sustainable
agreement on Doha.
A result here will benefit us all.
Trade is not a game where some
countries win and other countries
lose: quite the reverse. We all
become richer when trade increas-
es. This helps people to pull them-
selves out of poverty.
That is why the UK is also redou-
bling its efforts to enable develop-
ing countries to follow their own
paths to growth through trade and
investment, and to build the capaci-
ty for this, especially in Africa.
And all of us need to ensure all
developing countries can negotiate
trade agreements, and that global
trade rules reflect needs in all coun-
tries, and not just a select few.
Investment is the other side of
the coin. The UK is an international
hub for investors and currently the
world’s second biggest investor,
with firms such as Petronas, YTL,
Genting and MUI Group from your
country represented here.
Malaysian companies have also
made good use of the London Stock
Exchange to help them grow their
business.
We welcome overseas invest-
ment. The UK has more European
headquarters than any other coun-
try, and is one of the easiest places
in the world to do business. We
plan to remain so by cutting regula-
tion and corporation tax.
Equally, the UK is a huge investor
overseas. The UK already has signif-
icant investments here from the
likes of Nottingham University,
Dyson, Tesco and Giant. Opening
the global economy will bring
enhanced UK FDI, including to
Malaysia.
So a big challenge is before us. It
is to keep building an open global
economy and trading system that
benefits us all. This will drive
growth, jobs, and create wealth
around the world. We are confident
this is a challenge which the UK,
side by side with its international
partners including Malaysia, is able
to meet.
l Vince Cable is UK’s Secretary of
State for Business, Innovation and
Skills and Andrew Mitchell is
Secretary of State for International
Development
VINCE CABLE
ANDREW MITCHELL
COMMENT
UK Secretary of State for
International Development,
Andrew Mitchell
UK Secretary of State for
Business, Innovation and Skills,
Vince Cable — AFP