JULY 4 — We, in G25, are surprised to read in the press that Tan Sri Muhyiddin said he sees no problem with appointing politicians to the boards of GLCs (Government Linked Companies).

His statement is surprising because it contradicts the reform measures that were introduced following the devastating effects of the 1997/98 East Asia financial crisis, to strengthen the system of corporate governance in both the private sector as well as in the GLC sector. The new guidelines introduced by our Securities Commission follow world best practices as recommended by the Organisation for Economic Cooperation and Development (OECD). All boards are required to take full responsibility over board appointments, without being influenced by political or other interests. Where politically-linked candidates are proposed for board or management positions, the board must analyse whether they are politically active and whether they are professionally qualified. The world best practice is that no politically active candidates should be accepted for board appointments or for top management posts.

Khazanah Nasional Berhad also took action to strengthen corporate governance among GLCs. It led other GLICs to introduce the GLC Transformation Plan for the top 20 GLCs among their subsidiaries to set a good example on corporate governance so that the shareholders in their public listed companies, especially foreign investors, have confidence in the integrity and transparency of their commercial decisions.

In the banking and financial sector, Bank Negara Malaysia is empowered under its new legislation passed in 2001 to oversee that banks and financial institutions have proper systems and procedures in making board appointments, especially in GLC linked banks. The BNM Governor will intervene if a bank is considering appointing a politically active person to the board.

Statutory bodies are not GLCs as they are not incorporated under the Companies Act. They have their own legislation governing their establishment and operation. They are the implementing arm of ministries and therefore their governance system is different from GLCs. The Securities Commission guideline does not apply to statutory agencies of government ministries.

GLCs, on the other hand, operate in the private sector, competing with local and foreign companies in the market place for business. Therefore, they should not have politically-linked directors on their boards so as not to create unhealthy suspicions about their business decisions. This is a very important matter especially to foreign multinational corporations as they look around for a suitable location for their business operations in South-east Asia. As all countries are now adopting the world best practice in their system of corporate governance, Malaysia will lose out to our neighbours, and globally, if we continue with the bad practices of the past.

*This is the personal opinion of the writer(s) or publication and does not necessarily represent the views of Malay Mail.