Is this the beginning of the end for FGV?

The decision to make Felda’s businesses go public has been a failure, with FGV, we may see the end of it as a listed entity


MOMENTS before FGV Holdings Bhd held its AGM in Kuala Lumpur recently, it was announced that Tan Sri Megat Zaharuddin Megat Nor had stepped down as the chairman of Federal Land Development Authority (Felda)  chairman. Felda is FGV’s largest shareholder.

For the media, it was a riveting development before a press conference. But many of us did not anticipate an even bigger development at the annual meeting of shareholders which are traditionally a tame and dull affair.

Speaking to reporters after the five-hour gathering of shareholders, FGV chairman Datuk Azhar Abdul Hamid (picture) revealed that its major shareholders — including Felda which holds a 33.7% stake in the company — had voted against a pay package for FGV directors despite the amount proposed was identical to last year. 

“The irony is that the resolution to be reappointed was passed. In short, the message is — we want you to work but we are not going to pay you. It seems that all our efforts over the past year are not appreciated. That is our immediate feeling which may be wrong, but that is the feeling,” he said.

Azhar declined to attribute the hostile sentiment to his second letter to shareholders issued five days earlier. But clearly shareholders were not happy with the board’s plans to shift FGV’s focus to downstream activities if its land lease agreement (LLA) with Felda is terminated.

The termination of the LLA could immobilise FGV’s 68 mills as two-thirds of the fresh fruit bunches (FFB) processed at these mills are sourced from these settlers. But that is not the dealbreaker at the AGM.

Obviously the board had missed one crucial point. These settlers are not just crop planters who sell their FFB. They are not stupid either. They were promised the sun and the moon and all that is in between prior to FGV’s listing.

Many had own shares of the company which was the world’s second biggest listing after Facebook in 2012. Many are members of cooperatives that owns stakes in FGV. 

FGV’s announcement that it was not distributing any dividend for the financial year ended 2018 was the cause of utter gut resentment. How many companies and individuals got burnt by taking up the stakes in FGV when it went public? EPF was among the smart investors that dumped shares in the company. Another substantial shareholder, Lembaga Tabung Haji was saved by the government.

For shareholders including the settlers and other interest groups, the AGM was the platform for them to show their displeasure. This is where the management team at FGV have failed to understand.

The new management had devised a corporate playbook with all the best financial analysts and projects. All in the good aim to repair the damages at FGV. 

They had cleared the accounts, acted on legacy issues, optimised their assets, devised strategic plans to diversify the company’s revenue channels to shield itself from the erratic movements of crude palm oil (CPO) prices.

But FGV is not just another listed company. Its origin traces back before independence. Felda was established in 1956. It was created to help the poor, provide lands to the landless and alleviate them from the clutches of poverty.

While the efforts to return the company to profitability should be applauded, FGV management should also not to forget its raison d’etre – to essentially help the rural poor.

Many of these Felda settlers are old. Many are already in their 60s. They are drowning in debts from loans taken to replant their oil palm. The absence of any financial returns from FGV adds to their pain. In fact these settlers are worse off financially before the existence of a listed FGV.

So it was a hard sell when the chairman speaks about all the transformations at FGV. But to the shareholders, the issue is the financial return. It is also the first time the company fails to pay any dividend since it went public in 2012. 

The decision to make FGV a public company has been a failure. This points to a strong possibility that we may see the end of the company as a listed entity.

“Sometimes it is difficult. We try our level best to make people understand, but it is difficult when you refuse to understand. It is a challenge that we will have to immediately manage,” Azhar said.

If the directors at FGV truly want a change, they will have to get their hands dirty and address the problem down to its very core. Although those at Wisma FGV may feel they have done all they can, the reality is they have only touched the surface.

The ball is now in their court to decide what they want to do next, and the clock is ticking away.

Azhar did not ring the alarm on an exodus at FGV. He chose to remain calm and described the company’s directors as “responsible people” who will consider all options before deciding their next course of action.

Let’s be real. Who in their right mind would work for free? But you don’t get millions when others get excuses.

(The copy differs from the original piece and has been edited to provide clarity and correctness.)