November 24, 2010
Reminder to Sime Darby Shareholders: The AGM is on November 16, 2010 (10.30 am) at Sime Darby Convention Centre
By Din Merican*
During my days at the parent company of the Sime Darby Group, Sime Darby Berhad, the Annual General Meeting of its shareholders was usually a very timid affair. Shareholders raised very few questions. A few as these questions might have been, there were answered with conviction and utmost respect for shareholders who are the true owners of the company.
This is because they had the highest regard for Tun Tan Siew Sin and his successor chairman, Tun Ismail bin Mohamad Ali, and the then Group Chief Executive Tunku Tan Sri Ahmad Yahaya who was also a Board Director. All these gentlemen were known for their apolitical and commercial mindset, professionalism, and integrity. I understand that this tradition continued under Chairman Tun Ahmad Sarji bin Abdul Hamid with Tunku Tan Sri Ahmad Yahaya as his Deputy.
Sime Chairman, Tun Musa Hitam
Unfortunately, under the premiership of Abdullah Badawi, things changed. The chairmanship of this illustrious Malaysian flagship multinational corporation with a 100 year history fell into the hands of a political survivor and former Deputy Prime Minister, Tun Musa Hitam (I call him Musang Hitam, or the Black Fox).
This man knows practically nothing about running a corporation. That is to be expected, of course, since all his life Musang Hitam is a thorough-bred politician, who became a partner in the much touted 2M Administration of the early 198os. He was later booted out by Mahathir Mohamad and replaced by Tun Ghaffar Baba.
Naturally, Musang tends to see things in political terms. Intrigues abound in Sime today I have been reliably informed. The problem is compounded with the appointment of retired politically inclined civil servants with few exceptions to the Sime Board.
At this coming annual general meeting , Musang will have a few questions to answer, unless shareholders are too timid, only happy to enjoy the hospitality that will be laid out for them.
After reading the Sime Darby Group Annual Report for the year ended June 30, 2010 and the Chairman’s statement, I wish to raise a few issues on this blog about Sime Darby Group’s performance in the hope that shareholders can reflect and–then if they deem fit– raise them at the November 16 AGM as follows:
Composition of the Board
The first thing I noticed is that the Group Chief Executive, Datuk Seri Zubir Haji Murshid is not on the Board. He is just a the head of the Management Team. In the past, the Group Chief Executive who chairs the Group Management Committee sits on the Board and forms the vital link between management and the Board, and acts with the full authority of the Board.
The Chairman has no executive role in the Group since his role is strictly supervisory and his specific task is to preside at Board meetings . The day to day operations of the Sime Group are the responsibility of the Group Chief Executive and his Divisional and Regional Directors, backed by strong system of budgetary and financial controls.
This raises in my mind a three questions: 1) Why the change? Is there is any animosity between Musang Hitam and Datuk Seri Zubir warranting this change? 2) Is Musang Hitam Executive Chairman and Datuk Seri Zubir is only a General Manager with a fancy title of Group Chief Executive ? 3) If Musang is the Executive Chairman, then he must surely be accountable to the Board and shareholders for the affairs of the Sime Group. Is he?
Raja Tan Sri Dato Seri Arshad’s resignation
The second point I wish to raise to the issue of the alleged resignation of Raja Tan Sri Dato Seri Arshad Raja Tun Uda as Senior Independent Non-Director. Prior to his resignation, this well respected 63 year old former Executive Chairman and Senior Partner of PriceWaterHouseCoopers (PwC) was Chairman, Audit Committee and Member of the Risk Management Committee and the Remuneration Committee. I know Raja Arshad very well as Head of the PwC team on the Sime audit and as Treasurer of the Malaysia-British Society. He is a through and a no nonsense type, although gentle and polite in his mannerisms.
Directors not seeking re-election
The third point is the decision of Tun Ahmad Sarji, Bin Abdul Hamid (72 years old), Dr. Ariffin Mohamad Siregar (former Governor, Bank Indonesia, 76 years old), Dato Seri Mohamed Sulaiman (&2 years old), Dato Dr. Abdul Halim Ismail (71 years old) and Datin Paduka Zaitoon Dato Othman (70 years old), and Tan Sri Datuk Dr. Ahmad Tajuddin Ali (62) are not seeking re-election . But Musang himself (76 years old) and ex-bureaucrat Tan Sri Dato Dr. Wan Mohd. Zahid Mohd. Noordin (70 years) decide to remain on the Board and seek re-election by shareholders.
Entire Board should resign after the Oil and Gas (O&G) Business Fiasco
One would have thought that after the fiasco in the Energy and Utilities Division for which a sum of RM2.1 billion was made in the financial accounts for provisions and impairments, the entire Board in particular the Chairman should have resigned as a matter of good governance. In stead, we find Musang Hitam seeking re-election at this Annual General Meeting. Shareholders expect honest answers to these question I raise here, not more public relations responses.
Forensic Report on the Energy and Utilities Division
When the heavy financial losses of the Energy and Utilities Division emanating from the Oil & Gas (O&G) business first came to light, the Chairman told the investing public that Sime would conduct a proper forensic audit. What happened to the Forensic Report? All shareholders are told is, and I quote in the Chairman’s message, that “[W]e have identified the problems in the O&G business and are actively addressing them to turn the business around. We are also collaborating with strategic partners to strengthen our capabilities in this business”.
The Question of Dato Seri Zubir
Is that enough? Who are actually responsible for these losses? Why should Dato Seri Zubir alone be held accountable for this major financial loss? It is time in the interest of full disclosure to release this forensic report so that the curtain on the O&G fiasco can come down and Sime can move forward.
Sime Darby Group is still financially strong
Fortunately, Sime Group is financially strong with total assets of RM37.6 billion (Shareholder Funds at RM 21.1 billion with a healthy cash position of RM4.5 billion). That said, huge losses cannot be sustained over the long term.
Let us hope the new Board and the management team led by Dato Mohd Bakke Salleh will ensure that the Sime Group, Malaysia’s pioneer multinational corporation, which will be celebrating its 100 years in 2010, will continue to prosper in the years to come. Prudence not arrogance is the way forward.
* I joined Sime Darby in 1978 as part of the Malaysian team led by Tengku Ahmad Yahaya
to bring the company home. I served as Assistant Treasurer, rising through years to be Director of Corporate Affairs and Planning, Divisional Director (Malaysia Region) and Regional Director for Singapore and Indonesia and Managing Director, Sime Singapore Ltd until 1991 when I joined PT. Bakrie Brothers of Indonesia.
Dear Din Merican,
We salute you for this ” expose ” which is typical of the kind of political-intrigues culture grafted into Large-scale commercial enterprises – if unchecked would become cancerous & undermine the nation’s economy as a whole.
Since your goodself is privy to all the Reports & acquainted with facts and circumstances of ” manouverings ” and dubious dealings that may ruin people’s trust in Government-backed ventures, we implore you to go ahead..go…go..go EXPOSE all these corrupt way of ” management structures ” with frightenning underlying motives of people involved in selfish pursuits…..for themselves !
Syabas….
Sorry, the painfull reality is that this few billions ” dissipated into thin air ” ( imagine the staggering amounts considering other mega projects ) , should rightly have gone as benefits, whether monetary or in kind, to the majority down-rung of the deprived Malaysian population, especially to poverty-striken Malaysians in the rural, plantation & urban-poverty sectors, as envisioned by the late Tun Abdul Razak, which is far from fulfillment of his dreams…
Din, it is ‘Tunku’ and not ‘Tengku’. ‘Tengku’ is from Kelantan.
Din
The losses been hidden for a long time. Only now that the accumulated losses are getting too big to be hidden in the books. You must have seen this coming when you left in 1991.
The rot began far back then, we were aware of entire divisions of graduates were hired that had no business sense, let alone technical understanding of the systems that they had got themselves into. It was bumiputra time, and non bumi were made to get out. The corridors of Sime Darby changed in a very short period of time, and surely you saw that.
Sime Darby was a corporation with a specific goal of placing bumiputra executives to hasten Mahathir’s desire to portray Malay executives as being able to climb up the corporate ladder. The goal was never for profit or shareholders wealth maximization. The idea of buta gaji really set in the middle level executives. Behind schedule, cost overruns and customer dissatisfaction became norm. Musa Hitam has happens to be the Chairman when the effects and rot of the last two decades are finally surfacing. Sime Darby has got to go on asset sale or get an infusion from UMNO, the cash shortage cannot be hidden for long.
James,
By the time I left, Sime Darby had seen the departure of outstanding Malay executives like Malek Ali Merican, Halim Dahlan, Tunku Aziz, Rahman Ramli and later Mohamed Sulaiman, Karim Tarmisi (at Sime UEP), Abdul Shukor Nagor, Syed Tamin, and others whose names escape me. Sime lost good non-Bumiputra executives too.
There were changes at Board level with the infusion of retired senior civil servants. Men like Wee Cho Yaw (UOB Bank), Michael Wong Pakshong (Singapore), Sir David Li (Hongkong), Harun AlRasjid (Indonesia) and Anand Panyarachun (Thailand) retired from the Board.
When Tun Tan Siew Sin passed on and Tun Ismail bin Mohamed Ali was in his last years, Sime made a number of bad acquisitions like Sime Bank and Lex Refrigeration and its foray into Insurance went sour, all under the stewardship of Tunku Ahmad’s successor, Tan Sri Nik Mohamed. These losses were not as bad as the Oil and Gas fiasco where Sime has to make provisions totalling RM2.1 billion.
On hindsight, the merger of the plantation companies under Sime was a big mistake. Some RM500 millioh have been expended on fees for this exercise. Today, all Sime experienced executives have been eliminated, leaving mainly those from Kumpulan Guthrie, and Golden Hope to man the mighty ship. Bakke Salleh is a new man and will be have to rely on them as he embarks on a a major reorganisation of the Sime Group to turn around the Oil & Gas business, maximise potential across all core businesses, institute a high performance culture and review the portfolio mix of businesses. –Din Merican
Mongkut Bean,
Correction made. No other comments from you, apart from that one liner. Tean the investor from Kodiang is silent and so is Tok Cik. –Din Merican
Din
Please note that I am not blaming you. The insurance division was a total joke and so was the systems department – there were divisional managers that did not understand even how to read flowcharts. But then, we just accepted that it was their time and their say. Bean probably down with red wine blues and tok chik busy fixing his absorbers for another rough out.
Din
Some of the earlier investment fiascos during your days and a little later were bad decisions by professionals! In those days, Sime was not regarded as a GLC at all! Consider the UMBC fiasco when Sime lost the equivalent to more than a billion in current terms! Sime had absolutely no reason to go into banking. Yet it did and to what end? to help Dain Zainuddin?
But since the days of Zubir (or is it earlier?), when the Ministry of Finance politicised the decision making process and which I believe led to the disastrous financial results, there is very little professionalism involved.
Your questions are faie questions and I would hope that some minority sharhiolders will ask them. Lets wait and see.
Din
The reason for the plantation acquisitions is solely for purpose of landbanking. It is well known that at least in the state of Johor amongst land brokers, the government since 2009 has been blocking non bumi from acquisition of large plantation acreages.
I had the highest respect for the Sime Darby management team until this little heist by Black Musang.
Nearly got roped in by Guthrie to manage one of its rubber estates in Kuala Krai in the late 70s but my application to leave the service was turned down by Mindef.
That was the nearest I got to dabble in rubber other than the times we were tasked to conduct search and destroy operations in dirty rubber.
If the GLC wishes to regain the respect of the rakyat, the thieves must go enbloc…
Tok Chik, you should be glad not to be in the rubber business. You find lots of trucks filled with latex but in truth, the trucks are actually carrying mostly water, and the latex was already siphoned out. You will find fertilizers going out to the fields, but some ending up in the fields of the small holders. You will find cups of latex left over to dry for the night harvest. That is the level of pilferage in the industry. The industry dont take care of their employees, so it is a free for all.