Tuesday, 10 June 2014

Conflict of interest when regulators sit on company boards

Good article from The Malaysian Insider, see below.

Regulators should not sit on the boards of companies, be they listed or not, be they GLC or not.

Best is if this would be extended after retirement or quitting their job.

From the Hong Kong Civil Service Bureau:

"To maintain the integrity and standing of the Civil Service, it is important that civil servants on final leave and former civil servants should continue to act with good sense and propriety when pursuing post-service outside work as their actions will be seen by the public as a reflection of the culture and character of the Civil Service. They should avoid work which might be construed as being in conflict with their previous duties in the Government, or might bring the Civil Service into disrepute or cause public controversy."

If Malaysia is serious about combatting corruption (I am not convinced because the absence of any "big fish" being caught is painfully clear, I hope I will be proven wrong) then conflict of interest has to be avoided, whenever and wherever possible. It could take an example of Hong Kong, once one of the most corrupt cities in the world, that has significantly cleaned up its act.

"Question: Should regulators be on the board of government-linked companies (GLC)?

Datuk Seri Idris Jala (pic), the minister in charge of transformation unit Pemandu, does not think so and said so at an event yesterday.

The government's GLC Green Book recommends that regulators do not sit on board of GLCs. The reasons are simple: to avoid a conflict of interest and to make sure that there is fairness in decision-making and allocation of resources.

Actually, common sense should dictate that the people tasked with the job of making sure taxpayers funds are used prudently and government policies benefit the public should do so without being influenced by pecuniary or other considerations.

And yet, right across boards of GLCs, officials from various ministries are sitting pretty, and collecting hefty allowances on top of their monthly salaries, raising questions whether they can be seriously expected to function as regulators.

This is evident at Malaysia Airports Holdings Berhad (MAHB) where a couple of senior Transport Ministry officials are board members. They are paid between RM48,000 and just under RM170,000 in directors fees and other emoluments. This is in addition to the salaries they earn as senior Transport Ministry officials.

The problem with this arrangement is what are these individuals from Transport Ministry wearing: that of a regulator or that of a ministry official?

Put it more simply: did these individuals warn the government of the numerous problems at klia2 ranging from cost overruns to shoddy work? Did they raise red flags during MAHB board meetings on klia2 or even warn Prime Minister Najib Razak that more delays were expected, preventing him from making a premature announcement on the budget terminal's opening?

And when they deal with private airlines or deal with the combative Tan Sri Tony Fernandes and his AirAsia Group, are they acting as regulators or a GLC that pays them?

In short, who do they owe their allegiance to? Regulators have to be fair and must always look at the big picture."

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