GOVERNMENT LINKED COMPANIES AND STATE OWNED ENTEPRISES SHOULD BE MANAGED PROFESSIONALLY TO AVOID LEAKAGES AND WASTAGE OF PUBLIC FUNDS

Press-Release

Transparency International Malaysia (TIM) is very concerned with the recent statement by the Auditor General of Malaysia Tan Sri Ambrin Buang on how government agencies have recovered an estimated RM2bil in follow-up actions after audits conducted by his department. The recovered amounts could only be the tip of the iceberg given these audits were conducted on a limited sample size.

The audit relates to Government Agencies and Government Linked Companies (GLCs) and concerns their heads, in particular the Board of Directors. The government’s investment in GLCs via the rakyat’s money should not be mismanaged or misappropriated by the handful of unscrupulous officials who have betrayed the trust placed upon them.

Whilst we are thankful to the Auditor General and his dedicated staff for identifying the leakages and recovering RM2bil through their audit, we should be appalled at the failure of the heads of department in government agencies and board of directors who are appointed to the GLCs to discharge the duties entrusted to them by their stakeholders, namely the rakyat.

Leakages and fraud occur due to poor corporate governance being practiced and the failure of Boards of Directors in effectively guiding and overseeing the performance of their management. Company directors owe a fiduciary duty to act only in the interest of the company and to discharge their duties by using reasonable care, skill and diligence.

Establishing the right tone at the top is much more than having a compliance framework – it also includes fortifying the organization’s reputation and relationship with its stakeholders. Honesty, integrity and leadership by example are important criteria for a company’s credibility and success.

The three lines of defense model which is generally adopted and implemented by companies including GLCs seems to indicate that the management control, risk control and compliance, independent assurance from internal auditors together with having Chief Integrity Officers (CeIOs) has failed to function effectively. Strong monitoring and coordination by the Board of Directors would have helped identify and overcome this failure.

Given this audit and past reports from the Auditor General, the time for the government to review the criteria for appointment of directors to GLCs, and by extension State Owned Enterprises (SOEs) is long overdue. These directors should strictly meet certain mandatory criteria before being appointed. These include being competent, dedicated, knowledgeable in their respective industry, experienced and most importantly practicing the highest ethical standards of integrity and probity. Anyone including politicians who lack any of these criteria should not be appointed.

The nominated persons should then be vetted and cleared by the Malaysian Anti-Corruption Corruption (MACC) before their appointment as directors. The objective should always be about getting the right person for the right job and not rewarding via political patronage. More so when these entities operate using the rakyat’s money.

The appointed officials including directors if later are found to have failed to discharge their duties responsibly, or are involved in in any corporate scandals should not only be removed immediately from their post but also be subject to the strongest punishment allowed by law for having breached the trust of the rakyat.

Sending a firm message now is vital for the government to show its sincerity and seriousness in addressing rampant leakages and wastage of public funds.

 

Dato’ Akhbar Satar

President,

Transparency International Malaysia

 

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