The Mystery RemainsCORPORATE GOVERNANCE

MGM 4136 CURRENT ISSUES IN MANAGEMENT

JULY 2015

IntroductionCorporate governance essentially involves balancing the interests of the many stakeholders in a company. While the company tries to achieve goals and objectives, corporate governance also provides the framework for attaining those goals and objectives.

These include its shareholders, management, customers, suppliers, financiers, government and the community.

Corporate Governance framework :

1. Distribution of responsibilities, rights, and rewards

2. Procedures for reconciling the sometimes conflicting interests of stakeholders in accordance with their duties, privileges, and roles; and

3. Procedures for proper supervision, control, and information-flows to serve a system of checks-and-balances

Tabung Haji Buying TRX Land From 1MDB

Acquisitions:

Who gave the instruction and permission to buy the land?

Is it a norm that TH buying properties?

Is it just an act as ‘bail-out fund’ for 1MDB which is being accused of making lost and mismanaging its assets and investment?

Why did Tabung Haji bought the land at a very high price when 1MDB got the land from government at a very low price?

Defense:

• Tabung Haji negotiated the price from RM200 mil to RM 188.5 mil

• The land was bought below market price RM2,773 psf < RM 3,000 psf

• This is supported by professional valuation of the property

• TH claims that immediately after buying that property from 1MDB, there are already 3 ready buyers who are wiling to pay more than RM200 mil for the land.

• However, TH is planning to build high-end residential property on the land and will be undertake by its property arm TH Property Sdn Bhd

• The development is expected to be completed within 3 years.

• TH expects approximately 27% Return on Investment from this investment. price?

National Feedlot Centre (NFC)- is a company owned by Agroscience Industries Sdn Bhd ,

with participation from the government.

- The Auditor-General’s 2010 highlighted the NFC failure to achieve its target of 8,000 heads of cattle.

- The RM74 mil center in Gemas, N9 only achieved 3,289 heads of cattle of 41% of the target.

- On Jan 15, 2012 Najib confirms that the NFC’s assets are frozen to assist into investigations over alleged misappropriation.

- On March 12, 2012 Datuk Seri Dr. Mohamad Salleh Ismail, the Executive Chairman of NFCorp, was charged with criminal breach of trust and violating the Companies Act 1965 in relation to RM49 million in federal funds to the NFC

MARA – Overpriced Property in Australia

Property Name Market Price (RM) Purchase Price (RM) Overpriced by (RM)

Dudley International House 51.3 million 65.3 million 14 million

333 Exhibition Street 70 million 100 million 30 million

51 Queen Street 52.4 million 70.4 million 18 million

746 Swanston Street (newest

purchase)

75.7 million 138.6 million 62.9 million

Total 249.4 million 374.3 million 124.9 million

MARA – Overpriced Property in AustraliaNOW, an NGO headed by Pandan MP Rafizi Ramli, has charged that there are definitely elements of ‘criminal breach of trust’ in the series of property acquisitions by Majlis Amanah Rakyat (MARA) in Australia.

The Age - report in Aust (23 June) - ‘a group of super-rich Malaysian officials’ overpaid by RM13.8 million for an apartment block in the city in 2013.

Same Modus Operandi – Layered company

MAS – Transformation Plan

Overstaff – 6000 employees laid offOverpaid – Unreasonable allowance, OT and nightstop

Overpriced contracts - over 4000 contracts were being renegotiated

MAS pay Brahim’s RM250 million a year for 25 years

Spent RM1.55 million on 3 paintings.

About RM20 billion of taxpayers money has been lost by MAS since 1994.

From 2011-2013, MAS made losses totalling more than RM3 billion

Mismanagement of the airline is the biggest reason for money constantly being leaked out of MAS, and government constantly providing a way out. This safety net has prevented MAS from being competitive because it knows no matter how badly it does, someone will come to save it.

ConclusionFirst, the actions taken and decisions made are rather seems “fishy” in the eyes of stakeholders and the public. This is bad and will cause lose of faith from the rakyat and potential investors.

In summary, any company, regardless of the size (GLC, MNC or SdnBhd), should try their best to practice good corporate governance.

To recap, good corporate governance should take into consideration in three major part during any business and daily processes:

Distribution of responsibilities, rights, and rewards

Procedures for reconciling the sometimes conflicting interests of stakeholders in accordance with their duties, privileges, and roles; and

Procedures for proper supervision, control, and information-flows to serve a system of checks-and-balances.

Referencewww.investopedia.com/terms/c/corporategovernance.asp#ixzz3g1Lyjm2f

www.businessdictionary.com/definition/corporate-governance.html

http://www.thestar.com.my/News/Nation/2015/05/10/Fund-We-have-ready-buyers/

http://www.thestar.com.my/News/Nation/2015/05/08/Tabung-Haji-defends-decision-to-buy-TRX-land-from-1MDB/

http://www.malaysiafactbook.com/chronology-national-feedlot-corporation-scandal

http://www.thestar-online/the-nfcorp-issue

https://my.newshub.org/mara-paid-over-rm66-million-more-three-properties-melbourne-17454466.html

http://www.theedgemarkets.com/my/article/mara-unhappy-cops%E2%80%99-no-cbt-claim-aussie-property-buy

http://www.themalaysianinsider.com/malaysia/article/mara-overpaid-rm18-million-for-3rd-australian-property-watchdog-claims

http://www.themalaysianinsider.com/malaysia/article/mara-to-respond-tomorrow-on-rm65-million-aussie-property-buy

http://www.theborneopost.com/2015/07/01/politicians-told-to-stay-out-of-ongoing-mas-revamp/

http://www.economist.com/blogs/gulliver/2015/06/malaysia-airlines

http://www.thestar.com.my/Business/Business-News/2015/06/08/MAS-revamp-should-be-free-of-political-interference/?style=biz

http://money.cnn.com/2014/07/31/news/malaysia-airlines/