Experts say govt should step back from control of some GLCs

January 15, 2020 editor GLCs, Government-Linked Companies, Khazanah, MoF, Pankaj Kumar, PLUS

PETALING JAYA: The government should reevaluate the necessity of holding golden shares in government-linked companies (GLCs) and take a step back from the control it exerts over some of these companies, experts said.

Giving up these golden shares, they said, would send a positive message to the market, signaling that the GLCs would be more market-oriented, independent and professionally-run.

They said this in reaction to Khazanah Nasional Bhd managing director Datuk Shahril Ridza Ridzuan’s statement that the government should move away from having golden shares in GLCs.

Shahril had said during a panel session at the Bank Rakyat Integrity Forum 2020 yesterday that this would enable the board at these companies to appoint their ideal candidates for top managing positions like chief executive officer (CEO).

“Because of the power of golden shares, the government can make their own decisions to appoint their candidates, ” he said during the session.

He noted that the concept of government’s golden shares in the past was due to the lack of framework or ineffective regulations.

Today, with the presence of regulators in industries such as telecommunications, energy and aviation, he said there was no need for the government to hold on the golden shares.

The government currently holds golden shares in 32 companies via Minister of Finance Incorporated (MoF Inc).

Holding a golden share in a company gives the government the power to outvote all other shares, or overrule certain board decisions, depending on the company’s constitution.

Prime Minister Tun Dr Mahathir Mohamad, in reaction to Shahril’s comments, told reporters that the government insisted on holding golden shares in GLCs due to instances of mismanagement in the past.

“For example, 1Malaysia Development Bhd (1MDB) is not doing what it promised to do, in such a case, the government needs to take over, ” he said at the same event.

However, he said the government could look at letting go of its golden shares “if necessary”. This, he said, could be done following a proper study on each case.

Former head of corporate strategy at KSK Group Bhd, Pankaj Kumar said letting go of the golden shares would signal that the government was prepared to allow the companies to be more independent and market-oriented.

The government, he said, could release some control over certain assets such as in the power and telecommunications sectors, which have seen some liberalisation in recent times.

Others such as highways and fuel, he said, will likely continue to see control by the government, as it decides on pricing, toll rates and concession periods.

“These assets will remain very much in control, even if they don’t hold golden shares, ” he told StarBiz.

Pankaj noted that the government, back in the 1980s, took on golden shares in companies as it needed to ensure it could control decisions such as pricing, in line with the social agenda.

This is as some of the companies provided crucial infrastructure like power, telecommunications, and airport services.

“As times have evolved, however, the market is more open in terms of competition and services, so perhaps it is the right time to relook this.

“The government should look at what the purpose of the golden share today, and whether it is still necessary in some of these companies, ” he said.

Minority Shareholders Watch Group CEO Devanesan Evanson, meanwhile, stressed that golden shares were not good for corporate governance as it went against the general principle of “one share, one vote”.

He noted that MoF Inc., with its golden share, had the power to appoint a company’s chairman, CEO and some directors, depending on constitution of the GLC.

“Generally under corporate governance, the nomination committee evaluates potential candidates and recommends to board, and board will put it to shareholders to elect the director – but the golden share can overrule all this.

“In the end, shareholders, and even other board members do not get a say in the appointment, and end up with a director they did not vote for, ” he said.

However, he noted that golden shares were not necessarily and bad thing, and were suitable for companies that involve national interest.

Governments of many countries, he said, practiced holding golden shares in companies that were involved in areas of defence or immigration, for example.

In Malaysia, he pointed out, the government held its golden share in various sectors, some of which were unrelated to national security.

Socio Economic Research Centre executive director Lee Heng Guie concurred, saying the government should re-examine the rationale behind its golden shares.

“They should study whether golden shares have ‘outlived its usefulness’”, and make the necessary changes, ” he said.

For concerns about check and balance, there are minority shareholder watch groups as well as industry regulators, he added.