I grew up thinking that being a director of a company was important and prestigious. I was often told that people who took on this role commanded a high degree of power and maturity with deep industry experience.
Thus, if someone mentioned that he or she was a director of several companies, my feeling was one of awe.
I've since changed my mind. Among the many realities that have become apparent in the last three years, thanks to a slew of corporate scandals at Transmile Group Bhd, Sime Darby Bhd, Kenmark Industrial Co (M) Bhd and Linear Corp Bhd, is that too many company directors today are in the dark over the activities in their companies.
Consequently, they shoot themselves in the foot by admitting that they were not in the know and so should not be blamed for organisational misconduct at all.
But, then, one wonders what the purpose of the board is if it is not to act in the interest of the business and its stakeholders.
Take Linear Corp, which disclosed the other day that former non-executive director Alan Rajendram had advanced funds totalling RM36 million from its offshore account twice without the board's approval.
It went on to say that, after the two instances, the company had put in controls, including having two persons to sign for the release of funds from the offshore account. The question that arises is, why was there only one signatory to begin with?
I recall a conversation several years back with the chairman of a local company who told me that his top management was peeved with him for saying in an interview that its productivity level was nowhere near the industry's. Although what he said was true and it was a known fact in the industry, under pressure from the top management, he no longer was free to comment, simply because he was a non-executive chairman, that is, he was not, or should not be, involved in the day-to-day management of the company.
It did not surprise me that he faced such resistance from his management and was given a gag order. What did surprise me was that he did not pursue the matter.
Indeed, the company's management acknowledged recently that it had embarked on several initiatives to improve productivity. Imagine the years lost!
Given the recent scandals, shareholders are not so much angry as disappointed. At some point in the past 30 years, company directors appear to have lost the nerve to ask the tough questions.
This week, the Securities Commission and Bursa Malaysia launched a corporate governance forum at which prominent speakers highlighted the roles that company directors, auditors and management must play in ensuring the credibility of a company's financial statements.
One of the most frequently raised points was that directors should not take up too many positions, as highlighted by AMMB Holdings Bhd director Tan Sri Clifford Francis Herbert, who cited as a case in point an individual who was a director of 25 companies.
One wonders if he or she was able to spot any misconduct that might have occurred in any of the companies. As it is, trying to balance work in one organisation and family life is difficult enough.
As such, I can't help but think that the individual who held the 25 directorships did it for the director fees or prestige. Either that or we do not have enough quality directors to go around.
To be fair, not all directors are clueless about the health and issues of the companies on whose boards they sit. According to Securities Commission chairman Tan Sri Zarinah Anwar, there has been a great deal of awareness on the part of directors and principal officers of companies who have come forward as whistle-blowers.
"Before, we had few whistle-blowers coming forward. But, since the introduction of whistle-blowing provisions several years ago, we've had more than 40 cases of whistle-blowing as a result of the stakeholders being much more aware of their duty to whistle-blow," she had said after attending an event on Thursday.
Although Zarinah pointed out that only a handful of the 1,000-odd companies listed on Bursa Malaysia were involved in corporate misconduct and misbehaviour, these would not have to happen if board members were more involved and vigilant about the well being of the company.
New laws regulating corporate governance are essential. Limiting the number of boards on which one person can serve effectively would be a start.
Under the current Bursa Malaysia guidelines, an individual can become a director in not more than 10 listed companies and 15 private companies.
A government-linked company director is allowed to sit on the board of no more than five listed companies and a maximum of 10 private companies at any one time.
I think these numbers are still too high.
by Kang Siew Li
Business Times
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