Companies must be given a chance at redemption

Felda Global Ventures must be allowed to continue on its path to recover its share price.

COMMENT

By Hafidz Baharom

Everyone loves a good corporate scandal, and Malaysia is no exception to this.

The country’s history is rife with examples in the past and present to keep us reminded of the need for good corporate governance at all levels, as well as how often these frameworks may have overlooked pockets of weaknesses that damaged not only the brand, but subsequently the trust of investors, shareholders and insanely enough, got linked back to the government.

But in all such cases, resolving issues for the private sector and government-linked corporations have been conducted internally, before being handed over to the relevant authorities and the courts.

As was the case with Perwaja Steel, Maminco, and a long list of others. The same would apply in the case of Felda Global Ventures (FGV).

For any single entity of corporate Malaysia, their board of directors and management, should be given the chance to manage and settle any internal crisis based on their own internal policies and processes. After all, they were given that mandate by their stakeholders.

At the same time, they must work within a fixed period to settle issues internally before their next Annual General Meeting. Thus roughly, companies in crisis tend to have a year or less to get their house in order and to prove that they still have the confidence of their shareholders.

For listed companies, there is no way they can run from their fiduciary responsibility to settle problems, in the interest of the company, its shareholders and its investors – which might even include their own workers.

It is therefore the duty of management to oversee the performance of the business, and guarantee that the implementation of their business plan enhances its value for shareholders.

That being said, when questions arise regarding the management of projects that are scrutinised by the board of directors, and even put to a vote, the record needs to reflect who was involved, why they agreed to pursue such a project and how it will increase value for the fiduciary benefit of all shareholders.

Thus, when things go awry, there will always be a need to re-examine the framework within a company and locate the loopholes, even if it is FGV.

After all, any internal investigation must be held in compliance with company policies. This includes impartial adjudication, adherence to good governance and integrity standards, and ensuring due process and fair hearing – all of which are the norm for any company.

At the same time, as a listed company, the need to improve their performance and shareholder value in the long term must be put in place.

This includes ways to enhance yields and productivity, overcome the shortage of foreign labour and of course, divest from unprofitable investments.

In other words, they are going back to the focus on being a main plantation player and going back to its roots to return value, and this will take time, money but most of all, proper governance.

Whilst this is happening, what people don’t understand is this – any losses of shareholder value will disrupt the recovery of the share price, which in the end means a loss not only for main shareholders, but also minority shareholders.

For most companies, it includes members of their staff. For FGV, it will be the settlers themselves who have placed their value in the shares. All in all, we are looking at over 100,000 smallholders and their families.

We must, by and large, respect the will of the shareholders, particularly this group within Felda that reinvested their wealth.

Ultimately, whatever is done now to recuperate and better its performance will be to their judgment, which they will voice during the next AGM.

Therefore, bad publicity and interference will, in the end, create a lose-lose situation akin to a torched field where no one reaps any profits.

But I digress.

We should allow due process to take its course, as we always have by upholding the concept of innocence until proven guilty.

Let FGV continue on its path to recover its share price by doing what it was established to do. We have historically done this with corporate Malaysia many times over.

At the same time, the disciplinary inquiry must be allowed to continue to proceed in a fair and just manner based on company law and its internal strict governance procedures. If it reaches court, so be it.

Hafidz Baharom is an FMT reader.