The new govt has warned that remuneration for GLCs must be reflective of the company’s financial performance

by MARK RAO / pic by MUHD AMIN NAHARUL

THE move by FGV Holdings Bhd’s major shareholders to reject the remuneration package for the board of directors of the world’s largest palm oil company has compounded the issue of oversight in government-linked companies (GLCs).

A check by The Malaysian Reserve showed that the country’s most profitable bank, Malayan Banking Bhd (Maybank), had the highest remuneration packages for directors totalling RM16.83 million, according to its annual report.

Maybank, which is also Malaysia’s largest listed company by market capitalisation, paid its group president and CEO Datuk Abdul Farid Alias a total of RM9.6 million for 2018.

The emoluments and benefits included a RM2.64 million annual salary and a bonus of RM3.3 million, based on figures from the annual report.

Maybank, South-East Asia’s fourth-largest bank based on assets, recorded its highest net profit of RM8.11 billion for the January December 2018 period.

Meanwhile, Tenaga Nasional Bhd’s (TNB) remuneration for its board members stood at RM16.45 million for 2018, according to its annual report.

Remuneration comprises salary, emolument (bonus, EPF, allowances) and benefits in kind.

Former TNB president and CEO Datuk Seri Azman Mohd took home RM11.5 million for 2018, making up 70% of the total paid to directors that same year, according to the company’s annual report.

This largely consisted of emoluments which amounted to RM8.69 million against an annual salary of RM2.76 million.

Azman was replaced by Amir Hamzah Azizan on April 2 this year at the state-owned national power company.

Other GLCs’ board remunerations which make the top on the list include CIMB Group Holdings Bhd and Axiata Group Bhd, with total directors’ remuneration packages of RM15.84 million and RM15.74 million respectively for last year.

CIMB group CEO Tengku Datuk Seri Zafrul Abdul Aziz earned RM8.69 million in remuneration and it is part of the total remuneration to the board.

Malaysia’s second-largest bank by assets posted a profit of RM5.58 billion in the financial year 2018 (FY18), including gains from asset disposals.

Khazanah Nasional Bhd, Malaysia’s sovereign wealth fund, holds 26.99% and 36.93% shareholdings in CIMB and Axiata respectively.

The CEO remunerations pale in comparison to the RM36.17 million paid out to IHH Healthcare Bhd’s soon-to-be-retired MD and CEO Dr Tan See Leng for 2018 with bonuses and incentives amounting to RM31.35 million from the total amount.

IHH was a GLC prior to Khazanah divesting its 16% stake in the healthcare group to Japan’s Mitsui & Co Ltd late last year. Excluding Dr Tan’s payout, IHH directors earned a total of RM12.47 million in remuneration for 2018.

The company’s net profit for FY18 dropped 35% to RM627.69 million from RM969.95 million recorded in 2017.

The remuneration for Telekom Malaysia Bhd’s board, including EDs and non-EDs, came in at RM8.25 million, despite the company’s net profit having contracted 83.5% yearon-year to RM153.15 million last year.

Meanwhile, directors in Armed Forces Fund Board (LTAT)-controlled firms Boustead Holdings Bhd and Affin Bank Bhd earned a combined RM8.59 million and RM6.31 million in remunerations respectively last year.

Former LTAT CEO Tan Sri Lodin Wok Kamaruddin was paid RM5.06 million during his capacity as group MD for Boustead, a position he relinquished by the end of 2018.

For non-GLCs, the highest CEO remunerations for 2018 were often in family-controlled companies such as Genting Bhd, IOI Corp Bhd and YTL Corp Bhd.

Globally, the average Malaysian CEO earns substantially less than a top executive in the US, the UK or Singapore. Nonetheless, there is often a glaring discrepancy between the remunerations for GLC directors and the company’s performance — a discrepancy that is increasingly finding itself in the spotlight amid rising public scrutiny.

In FGV’s recent AGM, the Federal Land Development Authority (Felda), Koperasi Permodalan Felda Malaysia Bhd and the LTAT rejected the proposed remuneration package as it was not reflective of FGV’s financial performance.

A total directors’ payout of RM5.74 million was announced for the year ended Dec 31, 2018, against the RM1.08 billion in net losses raked up by the financially troubled Malaysian planter.

The new government, which came into power in May last year, had warned that remuneration for GLCs must be reflective of the financial performance and that exorbitant salaries will not be tolerated.

The government has since moved in swiftly to replace many heads and it is believed that these CEOs were given a new salary scheme.