We often ask why leaders of government-linked companies (GLCs) and government-linked investment companies (GLICs) become embroiled in allegations involving corruption, abuse of power, conflicts of interest and problematic investments.
But there is a bigger question that needs to be asked: Why do the ministries and government agencies entrusted with safeguarding the government’s interests in GLCs and GLICs sometimes appear only after problems have occurred?
This is a question that must be confronted courageously.
It would be unfair to suggest that all GLC and GLIC leaders are corrupt. Nor does an investment loss necessarily mean corruption has taken place.
However, when institutions such as Tabung Haji, the Armed Forces Fund Board (LTAT), MARA, FELDA and their subsidiaries, Permodalan Nasional Berhad (PNB), and other government-linked entities repeatedly face questions involving governance, investments, conflicts of interest and accountability, we need to stop viewing every case in isolation.
We need to examine the system.
The Problem Is Not Just Who Leads, But Who Watches Them
GLCs and GLICs manage enormous amounts of public funds and assets.
The government, meanwhile, has numerous mechanisms designed to provide oversight — ministries, owner agencies, government representatives, boards of directors, audit committees, risk management functions and auditors.
Yet whenever something goes wrong, the public inevitably asks: Wasn’t all of this already being monitored?
If it was being monitored, how could the problem have happened? If it was not, who failed to perform their responsibilities?
And if everyone subsequently claims they were merely performing their respective roles, then who was ultimately responsible?
Who was safeguarding the public trust — the chief executive officer, the board of directors or the ministry that appointed them?
Government Representatives On Boards: Watchdogs Or Meeting Attendees?
This may be an uncomfortable question, but it needs to be asked.
When the government appoints its representatives to a board of directors, how is their performance measured?
Is it based on meeting attendance, minutes signed, the number of meetings attended or allowances received?
Or should we instead ask how many decisions they challenged? How many risks they identified? How many critical questions they raised? How many investments did they demand further information about?
And, crucially, how many times did they say “no” when a decision did not make sense?
A director is not a spectator or merely an observer. A director is part of an institution’s defensive wall.
If that wall merely stands there without stopping anything, what purpose does it serve?
Directors Are Not Machines That Simply Raise Their Hands
An investment proposal involving hundreds of millions or billions of ringgit cannot be approved simply because management says: “We have done our research.”
Directors must ask: Who conducted the study? What assumptions were used? Was independent due diligence undertaken? Who are the beneficial owners? Are there related parties involved? Why was this particular company selected? Is the price reasonable? What is the worst-case risk? What happens if the investment fails?
If directors do not understand something, they must ask.
If there is insufficient information, they must demand more time.
If there is a conflict of interest, it must be declared.
And if a proposal is unconvincing, they must have the courage to say no.
“I Didn’t Know” Is Not A Culture Of Governance
When a decision becomes controversial, the public should not subsequently hear explanations such as: “I didn’t know”, “I merely followed the board’s decision”, “Management proposed it”, “I was only the government representative” or “I only attended the meeting”.
If you did not know, why didn’t you ask?
If you did not understand, why did you approve it?
If you had doubts, why didn’t you seek clarification?
If the documentation was incomplete, why was the decision allowed to proceed?
Directors are entrusted with responsibilities precisely because they are expected to exercise judgement — not merely listen to presentations.
Ministries And Agencies Cannot Become “Post Boxes”
There is another, potentially more serious, weakness in the system.
Government agencies responsible for GLCs and GLICs should not simply receive financial statements, key performance indicators, management reports, meeting minutes and audit reports.
If ministries and agencies simply wait for reports from the very organisations they are supposed to oversee, that cannot be described as proactive oversight.
It is closer to waiting to be told that something has happened.
Government ministries and agencies overseeing active GLCs and GLICs must have the ability to review, question, challenge and compare information, evaluate risks, scrutinise potential conflicts of interest and intervene before problems become serious.
Don’t Wait For MACC To Discover What Governance Should Have Detected
This point is particularly important.
The Malaysian Anti-Corruption Commission (MACC) has an enforcement function. But MACC cannot become a substitute for governance controls within the GLC and GLIC system.
If weaknesses are discovered only after MACC launches an investigation, then we must ask what happened to the internal control mechanisms.
Where was the board of directors? Where was the audit committee? The risk committee? The ministry or owner agency? The supervisory authorities? The auditors? Integrity and governance officers? Whistleblowers?
MACC should be the final line of defence, not the first system of control.
Tabung Haji, LTAT, MARA, FELDA And PNB: Don’t Just Ask Who Was Wrong
Cases involving different institutions do not necessarily share the same facts or involve the same wrongdoing.
Nevertheless, they can all provide lessons about governance.
When questions arise over an investment, we should not simply ask: “Who approved it?”
We should also ask: Who proposed it? Who conducted the due diligence? Who assessed the risks? Who provided an independent opinion? Who challenged the proposal? Who knew about potential conflicts of interest? Who monitored the investment after approval?
And ultimately: Who should have stopped it before it became a problem?
The Longer The Chain, The Less Clear The Accountability
Complex corporate structures involving public agencies, GLCs, GLICs and layers of subsidiaries can make it difficult for the public to determine who owns, controls and makes decisions within an organisation — and who ultimately benefits and bears responsibility.
Subsidiaries cannot become places where accountability disappears.
Whenever money and assets are connected to the public interest, the money trail must be clear and the decision-making trail must be equally clear.
Board Appointments Cannot Be About Who Knows Whom
Another fundamental issue is appointments.
The government cannot simply look for people whom it trusts or knows closely. It needs people who are trustworthy, possess integrity and, importantly, are willing to say no.
There is a significant difference.
We do not need directors whose loyalty is primarily to the individuals who appointed them. We need directors whose loyalty is to the institution and the responsibilities entrusted to them.
If someone is afraid to challenge a decision because doing so could jeopardise his or her position, then the independence of that board must itself be questioned.
Allowances Are Not The Problem — Accountability Is
There is nothing inherently wrong with directors receiving allowances.
The question is whether the responsibilities they perform are commensurate with the trust placed in them.
When directors oversee decisions involving billions of ringgit, their performance cannot simply be assessed by asking how many meetings they attended.
Instead, ask how many risks they identified. How many decisions did they challenge or question? How many weaknesses did they help correct? How much of the public interest did they protect?
Meeting attendance is not performance. An allowance is not a measure of responsibility. A signature is not evidence of oversight.
Government Representatives Should Be Evaluated Like CEOs
If CEOs are evaluated according to their performance, why shouldn’t government-appointed board representatives be evaluated according to the quality of their oversight?
The government should know whether its representatives actually read board papers and understand the numbers.
Do they understand investment risks and conflicts of interest? Are they prepared to challenge management? Do they closely follow developments within the company? Have they ever formally recorded a dissenting opinion?
If these things are never evaluated, we may have government representatives on boards, but that does not necessarily mean we have effective watchdogs.
Break The Chain Before Corruption Happens
There is a chain of governance weaknesses that can allow the risk of corruption or abuse of power to grow from one stage to another.
It can begin with the wrong appointment, followed by a board that lacks competence or independence. Weak supervision follows. Due diligence is inadequate. Conflicts of interest go undetected. Risky decisions are approved. Losses or mismanagement occur.
Only then, when an investigation begins, does everyone start talking about strengthening governance.
That chain needs to be broken much earlier.
Merit-based appointments can reduce the risk of weak boards.
Boards willing to challenge management can reduce the risk of improper decisions.
Independent due diligence can uncover problems before an investment is approved.
Effective conflict-of-interest checks can prevent interested parties from obtaining improper benefits.
Active, systematic monitoring by ministries and public agencies can identify warning signs before losses become substantial.
Effective auditing and risk management should intervene before enforcement authorities ever need to become involved.
Do not wait for corruption to happen.
Break the chain before it reaches the hands of the corrupt.
Corruption has a chain involving appointments, power, oversight, conflicts of interest and opportunity. Break that chain before public money becomes the victim.
Don’t Just Catch The Corrupt — Examine The Defences
Corruption may ultimately be committed by an individual, but large-scale corruption rarely happens without weaknesses in the system.
That is why we need to stop asking only: “Who took the money?”
We must also ask: “Who was supposed to stop them?”
When the leadership or senior management of a GLC or GLIC becomes embroiled in controversy, scrutiny cannot end with those individuals.
Examine the board of directors. Examine the government’s representatives on that board. Examine the ministry or public agency responsible for the institution. Examine how the chairman, directors and senior management were appointed.
Examine the due diligence. Examine the oversight system. Examine conflicts of interest.
Most importantly, identify who actually had the authority to say no.
Public money does not become endangered only when somebody takes it.
Sometimes public money first becomes vulnerable when the people who are supposed to ask questions remain silent; when those who should challenge a decision fail to challenge it; when those responsible for oversight simply accept reports; and when those with the authority to act choose instead to wait.
The government needs to establish a new culture in which everyone entrusted with power must be prepared to be questioned and held accountable.
Everyone sitting in a boardroom when decisions are being made about investing public money must understand that they are not there merely to attend a meeting and collect an allowance.
They are there to safeguard the public trust.
Because ultimately, the question is very simple:
If everyone in the room merely listens and nods, who is looking after the people’s money?
By Datuk Mohamad Fauzi Husin, Former Deputy Chief Commissioner of the Malaysian Anti-Corruption Commission
