starbizweek, saturday 12 February 2011 sbw�

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Politicising the boardShould ex-politicians be barred from board roles?

MADELEINE Albright. JohnMajor. Margaret Thatcher.Tan Sri Leo Moggie. Tun

Musa Hitam. Believe it or not, theyshare something in common – theyare all retired politicians who havebowed out from the executivebranch of the government and poli-tics to join the Corporate C-Suite.

In fact, there are a lot more ofthem. According to a global execu-tive search firm, if you were to scanthe Fortune 1000 today, the numberof public figures on boards has risensubstantially.

Just what is it about ex-politi-cians that make board recruitersdash for them? This – connections,expertise (legal and regulatory),name recognition and some evensay “fairy dust” (a dressed-upeuphemism for residual politicalclout).

Clearly, a politically-mindeddirector has its benefits. That’s notlost on the world’s second largestcompany Apple. In 2003, it appoint-ed former US Vice-President Al-Gore to its board. “Al brings anincredible wealth of knowledge andwisdom to Apple from havinghelped run the largest organisationin the world – the US government,”Apple’s Steve Jobs had said.

Wouldn’t that be enough torender the argument on whetherretired-politicians ought to fill upboard seats in companies futile?Truth is, the criteria of a company’sboard composition should restsquarely on competency, capabilityand track record. The same rulesshould apply, be it for an ex-politi-cian, ex-regulator, lawyer, account-

ant (lawyers and accountantsappear to dominate the share ofprofessionals on boards) or anyother individual for a board role.

In Malaysia, as in many parts ofthe world, such appointments tendto draw significant public derision.Perhaps because it lends credenceto the nagging suspicion that inbusiness, political connectionscount. Reality check – they DO.

This very topic took centrestageover the week when NationalEconomic Advisory Council (NEAC)member Datuk Dr Zainal AznamMohd Yusof remarked that corrup-tion could be curbed if politicianswere to be barred from holdingsenior positions in companies. Wasit a sweeping statement or was hetalking specifics as he had alsoreferred to the appointment of TanSri Mohd Isa Abdul Samad as Felda(Federal Land DevelopmentAuthority) chairman effectiveJanuary this year?

“Power corrupts. To put a politi-cian in the iconic successful worldof Felda is a double blow ... It’s a sadday ...,” he had said.

A day later, Prime Minister DatukSeri Najib Tun Razak shot back,saying that the Government willappoint any individual it feels iscapable of holding positions in GLCs(government-linked companies)and it would not deny politiciansthe opportunity to head GLCs: “Wedo not have such restrictions. Wewill make appointments based onthe ability of the appointee, wheth-er he is a corporate figure, formergovernment officer or ex-politi-cian.”

The Premier is right, of course, onthat count at least. Potential board-room candidates should be judgedbased on their merits and capabili-ties. No buts. (Whether or not IsaSamad, ex-Chief Minister of NegriSembilan whose Umno member-ship was suspended for three yearstill 2008 on suspected money poli-tics, has the “ability” to lead Felda,is a separate argument, of course).

Status check. How “pervasive” isthis trend in Corporate Malaysia?Hardly worth flinching, if a surveyby a professor from UniversitiMalaysia Terengganu (posted on theMaicsa website) is anything to goby. Having scrutinised data from asample of 84 non-financial top 100Malaysian firms in financial year2007/08, he discovered that direc-tors with public sector experiencemake up about a quarter of totalboard appointments.

Of this, retired politicians makeup only 3% of total board appoint-ments. “Retired politicians andgovernment officers are under-standably found on the board ofGLCs or family-owned companieswhich are involved in governmentprojects,” he pointed out.

Based on the G20, a group of 20(19 now, following a merger) mostsignificant and largest GLCs, nonebut two have ex-politicians aschairman – Tun Musa Hitam ofSime Darby Bhd and Tan Sri LeoMoggie of Tenaga Nasional Bhd. Theboards of five of these GLCs arechaired by ex-bureaucrats whohave served in the upper reaches ofthe Government.

Bear in mind that the pool of

candidates for non-executive aswell as independent directors isbelieved to be shrinking on the backof rising demand as the call forbetter governance gains momen-tum. Good people with the rightknowledge, experience and credibil-ity for directorships are not easy tocome by.

It may be unfair to ban those whohave served the public as politiciansfrom providing useful service bybeing on the boards of companies.The problem arises where there’s aperception that the administrationis steeped in corruption. As such,retired politicians, more thananyone else, may have to match upto higher expectations in carryingout their fiduciary duties and bring-ing value to the businesses with aconstant eye on governance.

Remember, one director does nota whole board make, although inreality, there are exceptions. Theentire board and its members areinvolved in the decision-makingprocess. This also means that whenthe ball drops, the entire boardshould be accountable.

Critics of ex-politicians taking onboard roles are concerned that itleaves much wiggle room for abuseand button-pushing which couldoverride true-blue business acumen.And they are right – such movespotentially court governance risks.

But these risks are not isolated toboards with ex-politicians alone.Instead, they ought to cover thewhole gamut of listed companies onBursa Malaysia.

There are several companies inMalaysia that are labelled as “politi-

cally-linked”, although the numbershave dropped significantly over thepast decade. They do not need tohave the presence of ex-politicianson their boards and most in fact,have none, but there exists implicitpolitical connections.

Then there are others who haveex-regulators on their boards. TanSri Munir Majid, who was once areferee of Corporate Malaysia as theboss of the Securities Commission,is now chairman of MalaysiaAirlines. The country’s longest-serv-ing Prime Minister Tun Dr MahathirMohamad is advisor to two majornational companies – carmakerProton Holdings Bhd and oil giantPetroliam Nasional Bhd (he holdsno board positions in these compa-nies). Given their experience andknowledge, are they better able toadd value to the businesses? Orshould they be banned from suchroles based on potential governancerisks due to past clout?

Ex-politicians, no doubt, arebetter able to exploit their contactswith their board seats. But as LordGeorge Robertson, a former UK poli-tician who took on a series ofboardroom roles years ago and hadcome under scrutiny for that hadshouted back in his defence – “Butwho doesn’t trade on past connec-tions?”

l Business editor Anita Gabrielwonders if ex-politicians suffer from“Limelight Deprivation Syndrome”which is what makes them jump totake up boardroom roles. She alsowonders if there should be a coolingoff period ...

ANITA GABRIELanita@thestar.com.my

SIDEWAYS

Boosting trade ties can reduce poverty

WE live in a world where we aremore connected than ever before.

The UK is linked to Malaysiathrough ties of business, education,friendship, and a wealth of commoninterests.

These international connectionsoffer huge potential for growth intrade and investment, as long asmarkets are open and countries areable to trade freely with one anoth-er.

The fastest growing countriestend to be those with the fewesttrade barriers. So to realise ourpotential, we must commit to openmarkets globally. We must not slipback into protectionism.

That is why the UK Governmentpublished on Feb 9 its Trade andInvestment White Paper: an ambi-tious strategy to nurture interna-tional trade and investment rela-tionships, strengthen the multilat-eral system, build up our domesticbusiness environment, and enabledeveloping countries to build theirown paths to growth.

The Paper demonstrates thattrade and investment are critical forthe UK to achieve strong, sustaina-

ble and balanced growth in thefuture. As a strong trading nation,Malaysia will be in a similar posi-tion. And while Malaysia’sEconomic TransformationProgramme (ETP) will no doubtboost domestic demand, trade willremain an important contributor toGDP. Important investment projectssuch as Iskandar will encouragemore international companies tobase their regional operations inMalaysia.

The Paper makes the case for:

open markets and the dangers ofprotectionism; removing trade andinvestment barriers and improvedmarket access for UK business with-in the EU and beyond; helping toconclude the Doha DevelopmentRound of trade talks in 2011; work-ing to strengthen the WTO;supporting early conclusion ofpriority EU Free Trade Agreements,including one with Malaysia;supporting trade and regional inte-gration in Africa; and working withG20 members towards these goals.

Our most immediate task is tofinalise the Doha trade negotiations.This historic agreement, oncesigned, will boost the world econo-my by £110bil. So we must all movequickly to make 2011 the year thatthe Doha trade talks are finalised.Momentum is building. We will beworking on plans and roadmaps tomeet this goal.

And we are sure that Malaysiawill share many of our ambitionsfor a far reaching and sustainableagreement on Doha.

A result here will benefit us all.Trade is not a game where somecountries win and other countrieslose: quite the reverse. We allbecome richer when trade increas-es. This helps people to pull them-selves out of poverty.

That is why the UK is also redou-bling its efforts to enable develop-ing countries to follow their ownpaths to growth through trade andinvestment, and to build the capaci-ty for this, especially in Africa.

And all of us need to ensure alldeveloping countries can negotiatetrade agreements, and that globaltrade rules reflect needs in all coun-tries, and not just a select few.

Investment is the other side ofthe coin. The UK is an internationalhub for investors and currently theworld’s second biggest investor,with firms such as Petronas, YTL,

Genting and MUI Group from yourcountry represented here.Malaysian companies have alsomade good use of the London StockExchange to help them grow theirbusiness.

We welcome overseas invest-ment. The UK has more Europeanheadquarters than any other coun-try, and is one of the easiest placesin the world to do business. Weplan to remain so by cutting regula-tion and corporation tax.

Equally, the UK is a huge investoroverseas. The UK already has signif-icant investments here from thelikes of Nottingham University,Dyson, Tesco and Giant. Openingthe global economy will bringenhanced UK FDI, including toMalaysia.

So a big challenge is before us. Itis to keep building an open globaleconomy and trading system thatbenefits us all. This will drivegrowth, jobs, and create wealtharound the world. We are confidentthis is a challenge which the UK,side by side with its internationalpartners including Malaysia, is ableto meet.

l Vince Cable is UK’s Secretary ofState for Business, Innovation andSkills and Andrew Mitchell isSecretary of State for InternationalDevelopment

VINCE CABLE &ANDREWMITCHELL

COMMENT

UK Secretary of State forInternational Development,Andrew Mitchell

UK Secretary of State forBusiness, Innovation and Skills,Vince Cable — AFP