Corporate governance red flag in TM's permanent CEO appointment quagmire

Corporate governance red flag in TM's permanent CEO appointment quagmire
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KUALA LUMPUR (June 11): While Prime Minister Tun Dr Mahathir Mohamad has somehow put to rest the stalemate regarding the appointment of a permanent CEO for Telekom Malaysia Bhd (TM), the guessing game now rages on as to whom the candidate is, given that the individual will not be the current acting CEO Imri Mokhtar.

This follows recent news reporting on the development of the TM saga, which has raised more questions that require urgent answers.

Speculations are rife on the candidate's identity with Celcom (Malaysia) Bhd's former chief technology officer Datuk Noor Kamarul Anuar Nuruddin, and TM's very own director who now represents Khazanah Nasional Bhd's interest, Dr Farid Mohamad Sani — TM's former chief strategy officer, named as forerunners for the coveted post.

Dr Farid has subsequently clarified that he was never interviewed as one of the candidates and Khazanah will always respect the process in line with the constitution and governance.

Above all else, it is heartening to note that Khazanah has clarified its stance that it will never interfere outside the selection process of TM's permanent CEO to uphold the spirit of good corporate governance practices.

As a proponent of corporate governance, I am very concerned with the recent spate of corporate developments surrounding TM, especially over how inaccurate and unverified information are being played up by the media. This warrants the question as to where the media obtained such information or rather who has fed the media with inaccurate information.

Another area of concerned — based on news reporting over the Hari Raya period — is that there are more than one candidate being considered and recommended to the Ministry of Finance (MoF) in its capacity as TM's special shareholder.

Why was the prospect of an external candidate being favoured over Imri not brought up by TM's chairman Rosli Man during the telco giant's recent annual general meeting (AGM)? According to Rosli, there is only one candidate recommended to the MoF, which has subsequently approved Imri's appointment last February.

If Rosli is indeed unaware that there will be a second or third potential candidate for the post, then I have to state that TM is in dire straits insofar as corporate governance and board integrity are concerned.

Not only that more than a year has lapsed since TM is without a permanent CEO — which truly hinders the ability of the company to scale greater heights — the latest development begs the question if the new candidate has really gone through a thorough nomination process. And as reported, if he is more capable and suited for the position, why then, did the Nomination and Remuneration Committee (NRC) and TM's board recommended Imri to MoF for the position?

Even if we go by "the proof of the pudding is in the eating" yardstick, Imri is certainly not a pushover considering he has been instrumental in drumming up TM's net profit significantly for the first quarter ended March 31, 2019 (1QFY19) to RM308.28 million (1Q18: RM157.15 million) on the back of reduction in operating costs.

This is somehow a reversal of fortune, because in its 2018 financial year-end (FY18), TM's net profit dipped 83.5% to RM153.15 million (FY17: RM929.75 million), having been adversely impacted by persistent headwinds in the industry as well as tough operating landscape.

Moreover, Imri is also unlikely to shortchange TM in terms of job experience given he was previously TM's chief operating officer as well as executive vice president of UniFi, thus responsible for the end-to-end management of the converged portfolio comprising phone, broadband, mobile, TV, Wi-Fi and value-added services for TM's home, and small and medium enterprise customers.

Having proven his performance thus far, one wonders why Imri is deemed unsuitable or even not ready for the permanent CEO position, more so when he was recommended by the NRC and TM's board of directors.

In fact, controversy in the appointment of TM's head honcho was sparked at the group's recent AGM as highlighted in my article published in StarBiz on June 3.

To put matters into better perspective, the debacle over the appointment of a permanent CEO at TM intensified when Rosli fielded questions from shareholders by issuing conflicting statements on the issue, notably by saying:

  • TM board has recommended for Imri to be confirmed as a permanent CEO but response was not forthcoming from the MoF, which holds special rights on the appointment of CEO by virtue of its status as a special shareholder (at the outset of the AGM), and
  • The appointment of Imri as CEO was approved by MoF in February this year (at the tail-end of the AGM) but the Prime Minister's Office (PMO) has given the subsequent instructions to put on hold the announcement on Imri's appointment as permanent CEO.

In a filing to Bursa Malaysia on May 31, TM clarified that MoF has subsequently, via a letter dated Feb 28 addressed to Imri (copied to the chairman and the company secretary), approved the appointment Imri as a permanent CEO.

"(However), the Chairman (Rosli) informed the board in early March 2019 that he received a request from the PMO to defer the appointment," noted the clarification. "We believe that it is good corporate governance to engage key stakeholders including the Prime Minister's Office."

Righting a wrong
If it is true that MoF has approved the appointment of Imri as permanent CEO, why is there a change of decision now? Does this mean someone from MoF is trying to plant a particular candidate, hence bulldozing the recommendation by TM's NRC as well as its board for Imri to be confirmed as the permanent CEO?

The latest turn of event somehow reflects a flip-flop policy and U-turns in that the Pakatan Harapan (PH) government has pledged not to intervene in the upper echelon or even day-to-day running of government-linked companies (GLCs).

From a governance perspective, we had already been through the bitter experience of excessive power abuse within Corporate Malaysia with GLCs and government-linked investment companies (GLICs) coming under the direct control of a Prime Minister who was also Finance Minister.

Allowing the tendency of interference to rear its ugly head is obviously a distortion of corporate governance practice. Worst still, this works against the principles of good governance that the PH government is propagating in its quest to enhance the governance of listed GLCs, which also count other shareholders aside from government-related entities.

More broadly, the current practice of allowing the Prime Minister or Finance Minister — as opposed to market forces — to determine the rightful candidate for TM's permanent CEO is contrary to PH's earlier pledge that the government will divest the GLCs so that the private sector can return to the driving seat of the economy.

Indeed, the government has commenced a plan to divest its interest in some GLCs, either via paring down its stakes, public listing of companies or outright sales. But the slow pace of the divestments calls into question the government's sincerity in reducing its direct role in the economy.

And now with clear evidence of interference from the PMO when approval was already granted by MoF, investors are watching closely what will happen next.

Is this the beginning of more interference in GLCs moving forward or is there already a move to exert influence as opposed to the promise of the PH administration that business will not be mixed with politics, in that governance process will not be compromised as the current administration strives to enhance the governance of GLCs?


*The views expressed in the article represent the views of the writer and do not necessarily represent the official views of IIC.

Lya Rahman is currently the Adviser to the Institutional Investors Council of Malaysia (IIC) and is the former general manager of the Minority Shareholders Watch Group. She can be reached at [email protected].