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When corporate greed destroys Malaysia's future

HOW DO YOU KNOW, IN BLESSED Bolehland, how effective is a chief executive officer of a company listed on the Kuala Lumpur Stock Exchange? He can be an inspired corporate leader more interested in turning out a steady profit while charting into unchartered waters with such care and thought that widows could exchange their paltry savings for its shares, and be assured of a regular income. But that is not the Malaysian way. There are such companies - the Kuok group of companies to name one - whose CEOs would never make the list of the highest paid but whose shareholders are only too happy to invest in their companies. Indeed, they would be offended if they were.

Then there is the Bolehland standard: the CEOs run a company that specialises in gambling or are cronies of the Establishment and push their share prices up the roof when times are good, and scrape the bottom of the barrel when misfortune strikes. But the CEOs will continue to be paid as handsomely no matter how badly the shareholders have done on their shares.

The New Straits Times' Business Times supplement on 02 August 2003 surveyed the renumeration of the chief executives of the 448 listed companies whose highest paid executive is paid more than RM300,000, and published the top 20 highest paid. Top of this list is the nonagenarian CEO of Genting Berhad and its offshoot, Resorts World Berhad, Tan Sri Lim Goh Tong, who received a total of about RM110,000, which with his stake in the two companies, brought it up to RM133.5 million in 2002. Both companies are associated with gambling and leisure, and is proof how important gambling is to the Malaysian economy.

The Berjaya Group, which comes next, sunk further into a quagmire when its leading light decided to turn his Bukit Tinggi resort into a casino, against the law, and ran into a political storm and had to surrender his licence. Its leading light is the self-styled international business man of unquestioned repute, Tan Sri Vincent Tan (he is upset when his given name, Chee Yioun, is not mentioned in the same breath, so I shall not) is next as the CEO of three companies whose shares scrape the bottom that it is a penny stock, there for the flutter but not serious investment. But that has not restricted his pay packet. Three companies are listed - Berjaya Group, Berjaya Sports Toto and Berjaya Land - and they paid him in salary and directors' fees about RM24.75 million which with his shareholdings in them rose to RM35.3 million.

These two have five companies in all on this list, and involved in gambling and leisure. If the casino aspect of their companies are removed, they would not make the list in a hundred years. In this list are a handful of well-run companies - Public Bank, British American Tobaco, Courts Mammoth - but most are cronies of the Establishment. The Berjaya companies, RHB Capital, Leader Universal Holdings, Celcom, Hap Seng Consolidated, Malaysian United Industries, IOI Corp, YTL Corp cannot survive this list for long after the Crony chief, one Dato' Sri Mahathir Mohamed, retires by the year end.

Once this list was studded with such giant-turned-minnows as Renong and UEM. Many of them would bite the dust, as several already are though it is not reflected in the companies their CEOs take home. Their only vision now for their companies is how much they could take home this year. The total take home pay, not including their shareholdings, for the 20 highest paid CEOs is RM171 million, or an average of RM8.5 million each. It is a fair assumption, on past practice, for many of these CEOs to disappear from the list next year.

Like CEOs worldwide, they are not accountable for how well their companies do, and their remuneration rises the more as their companies bite the dust. There is always the well-turned public relations blitz to say how these CEOs would not work as hard if they are not compensated beyond greed's reach. This is a specious argument. But in the laisse faire commercial world we have become accustomed to, this is the only raison d'etre. The companies will not do well if their CEOs are not paid market rates, but when the market rates are based on the universal greed in boardrooms, it is a self-fulfilling wish.

When companies bite the dust, large scale retrenchements throw out the workers, not the architects of the failure of the companies, who are usually well rewarded. Which is why the lifestyle of the high and mighty CEOs are framed in unrepayable debt. Should the companies collapse, they go bankrupt, thousands of workers are out on the street, with little or no compensation, and those who brought it to that level laugh all the way to the bank. One company in this list matches the CEO's monthly employees provident fund contribution of RM300,000 is matched ringgit-for-ringgit. That company is a penny stock now.

The self delusion that inflicts those in authority has seeped down to the corporate sector. The Prime Minister, Dato' Seri Mahathir Mohamed's crazy belief - like his crooked bridge across the Johore causeway - is based on an unfounded belief that when he decides on a policy, it is done. No effort is made to work to that goal. The small scale industries were ignored in this mad rush to be a developed society by 2020, when the government decided that only huge sogososha like companies, hastily put together for no rhyme or reason, was how we should develop.

The small time business men saw this as their chance to rise high quickly and rushed to be cronies of the Establishment for the perks of that relationship. Every single company so favoured are now deep in unrepayable debt running into several hundreds of billions of ringgit. All that the Mahathir dream is a destruction of Malaysia as we knew before he took over into another Third World basket case, in the same context as Henry Kissinger's famous reference to Bangladesh in the 1970s. A senior civil servant confided at a casual meeting that Thailand has all but taken over from Malaysia in the vibrance and reach of its small industries, the rockbed of its industrialisation. We ignored it for so long that when we need them, we do not know how to garner them to the national need. The chickens come home to roost. Soon even these highly paid CEOs would have to remove that smirky smile off their faces.

M.G.G. Pillai
pillai@mgg.pc.my