Harsh fines for non-executive independent directors? (2)

I completely forgot that "Good Stock Bad Stock" had written about this same issue. The link to his article is here:

http://goodstockbadstock.blogspot.com/2011/07/when-independent-directors-cum-auditors.html

Some snippets, and bear in mind that the writer is trained in accounting:

"Auditors, as a profession, seem to get away with most flak. When a company collapses, it is always the management fault. It is also the fault of the investment bankers, the analysts, the fund managers and the regular retail investors. But, as usual, no criticism was leveled on the auditors, the one that supposed to ensure the company viability as a going-concern. Auditors, as a profession, is filled with people of questionable intelligence, but try to make themselves look smart with all sort of jargons. Auditors, as a profession, also teach future auditors that they are not responsible for any sort of crap that happened. Auditors, as a profession, thinks that shareholder lawsuits against them is bad for the industry, that they are god-like and should never be sued. Auditors, over the years, have perfected the art of responsibility avoidance.

So, when one Independent Non-Executive Directors (INED) and Chartered Accountant of Golden Plus Bhd ("Gplus" hereafter) writes to the Star to defend himself and his peers, it is filled with the "responsibility avoidance" tone that plague the industry. Read his full letter here : Harsh fines for non-executive indepenent directors. According to the annual reports of Gplus, the author apparently is a corporate governance expert. But, the things he says make non-corporate governance expert like me shudder. The author is also a fraud expert. The author also did some stint with KPMG UK, Singapore and Malaysia.

So, here is what he says:

To subject these directors to such hefty fines and penalties seem rather harsh, more so when they are not in any position to control events, which are mainly the domain of the executives. The members of the audit committee and in particular, the audit committee chairman, are there by reason of a Bursa Malaysia listing requirement. At least one of them must be a member of the Malaysian Institute of Accountants (MIA).

Oh, you mean you are there just to help some strangers fulfilled its Bursa Malaysia listing requirements? You really very good people lo... Or...Did you do it for the business contacts, for the business favors in return for future businesses?

They are only able to play a role of advising at directors’ meetings and/or not approving questionable acts and transactions, but are never in a position to dictate when an act is to be accomplished by the company, for example, the issuance of quarterly financial statements, annual audited financial statements and the like.

Hmm..did you know that you can actually resign? Plus, for all the director's experience and expertise in corporate governance, he seems to not understand our companies act and basic company law. Basically, executives are answerable to the board of directors and the board of directors, in turn, are answerable to the shareholders. So, our corporate governance "expert", is ranked higher than the management. During the time the offences are committed by Gplus, there are more INEDs than executive directors in the board. If the INEDs actually do their job properly, they can threaten to sack the management for failure to publish the account. For all his auditing experience and expertise, he seems to "forget" to do so. In addition, aren't making sure that quarterly financial statement publish on time is part of your role, as in, as a director, you should be receiving regular updates from the company. When there seems to be no updates, don't you think that you should be concern and asked the company for their apparent lack of update?

Oh, his licence got restricted, that's why he is so pissed off. But, I want to ask a question. If you do not have the ability to do the job properly, why do you take it up in the first place? If directors can't be penalized, how can we ensure that they will do their job properly? Imagine murder is not punished by life sentence or death penalty, everyone will go around killing people."

Pitty the author stopped blogging, hope one day in the future he will continue again.

Why are so few auditors of Malaysian listed companies being punished when fraud is detected? The only time I have understanding for this is if the auditor was the whistleblower, but surely that was not always the case. Puzzling.