KUALA LUMPUR (July 23): Malaysia’s biggest pension fund is prepared to use its voting rights to weigh in on the pay of directors at more companies, according to a person with knowledge of the matter.
The state-owned Employees Provident Fund, which manages 814.4 billion ringgit (US$201 billion) of assets, is ready to voice its expectations for executive salary and appointments by voting at shareholder meetings, if talks with the board and management don’t work out, said the person, who asked not to be named as the process is private.
That signals wider reverberations across companies that EPF is invested in, after the fund voiced its disapproval of Sapura Energy Bhd’s President and group Chief Executive Officer Shahril Shamsuddin’s remuneration. Prime Minister Mahathir Mohamad is keeping his pledge that “heads must fall”, after his coalition toppled a previous government that had ruled for more than six decades. The central bank governor has resigned, followed by executives at state-linked Petroliam Nasional Bhd, Telekom Malaysia Bhd and Permodalan Nasional Bhd.
“It’s good corporate governance,” Danny Wong Teck Meng, chief executive officer at Areca Capital Sdn Bhd, said by phone in Kuala Lumpur. “By using the votes, EPF is making the right call. It will remind the board and management of public-listed companies that they have a fiduciary duty to manage the company properly.”
EPF voted to unsuccessfully oust Sapura’s Shahril at an annual general meeting on July 18. Shahril was paid 71.92 million ringgit, including 55 million ringgit in bonus, for the fiscal year ended Jan 31, when the company had a 2.5 billion ringgit loss. This is the first time an institutional fund took
an active stance in Malaysia, the Edge reported, citing Lya Rahman, general manager of the Minority Shareholder Watchdog.
“The EPF is committed to the agenda of promoting strong governance practices in corporate Malaysia, and expects the same to be practiced by all its investee companies,” the fund said in an emailed response to Bloomberg.
The pension fund is the biggest investor of Malaysian stocks and owns more than 5% stake in many listed companies, including Sapura and Telekom, as well as power firm Tenaga Nasional Bhd, Malayan Banking Bhd, free-to-air TV operator Media Prima Bhd, and builder Gamuda Bhd. Its equity investments accounted for 41.6% of its total assets, according to its statement released in June.