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10/07/2005

corporate governance and misplaced trust

corporate governance has been kicked around quite a fair bit recently with several high profile corporate failure and corporate fraud. there were some changes made towards ensuring better corporate governance and corporate transparency to protect minority shareholders' interest. and of course there were a lot of cheap talks about corporate governance but with very little attempt to make real changes that will benefit the genuine small shareholders. there have been a few cases of disclosure where absentee directors were kept in the board and continue to be paid generously. are the few cases that were made public all there is or were they only the tip of the iceberg? how many redundant senior management staff have been retained for all kinds of reasons except the right reason in the industries. how many are kept and paid handsomely at the expense of returns to shareholders? at the lower end of the economic structure, workers above 40 are expected to take a pay cut as they grow older, presumably becoming less productive. but at the top management level, many who have outlived their usefulness, or no longer as productive as before, are still being kept and paid continuously increasing salaries. some even have special posts created just to keep them in the payroll. the question is, whose money is used to pay for these senior gentlemen who are no longer shouldering their share of the load? there are of course some senior gentlemen who still worth every cent they received. but not many. does the current corporate governance practices ensure that everyone is being paid his worth and not large wages and perks to recognise past contributions of senior management staff?

4 comments:

redbean said...

some of the key prerequisites for good corporate governance.

1. an independent body to appoint independent directors to the board.

2. the appointed directors must not be beholdened to the management and their rewards and terms of service must also be independent of management.

3. the independent directors must not be connected or related to the management.

redbean said...

has the administering of corporate governance flouted some of these basic principles? are we still appointing related people by related people or by management to be independent directors?

are our independent directors beholden to the management who appointed them?

are their appointments and remunerations tied to the approval of management?

or we are just kidding?

redbean said...

another worm is uncanned today. the paper reported that ex mp lew syn pau, a chairman and director of a string of companies, have violated the companies acts and is being charged in court.

lew, an ex mp and a scholar, is one of the supertalents that sits in many boards and wears many big hats.

with his generous incomes from all the directorships and chairmanship, it is unlikely that lew would want to run foul of the law. he is one of the rare talents that are handsomely rewarded in our meritocratic system. people who are able to help the company to grow and bring in huge profits will always he highly regarded and highly paid.

redbean said...

jackson tai of dbs was unhappy that public companies are expected to report quarterly financial statements as a means towards greater transparency and good corporate governance. the value of such frequent reportings may not really achieve the desired results except more works for the finance people and management which can be used for more productive purposes. its value thus is very subjective.

he also commented that mas rulings on directors with 5% or more shares of the company cannot be regarded as independent directors. thus affecting the pool of independent directors available.

i totally disagree with this comment. the current practice of appointing independent directors is totally foul, being the private tuft of a small pool of people who know one another. i appoint you, you appoint me. and it ended up with one person being director of 10 or 20 companies. it is not only an insult but a fallacy to claim that there is not enough qualified people to fill in as independent directors. there are many in the financial industries very well qualified to fill all the independent directorship even if mas changes the rules to limit each person to a maximum of 3 directorship.

this independent directorship has been a pie that was closely guarded and no strangers are allowed in. and the party and merry making continue even when it breaks all the fundamental prerequites to ensure good corporate governance really works to the benefit of the small investors.

for good corporate governance to work, a new set of rules must be introduced that ensure all independent directors are really independent.

many qualified professionals have been prematurely retired and many are about to retire. all these people are expected to live till 80 or 90 years old. independent directorship is a good opportunity to provide a source of income to all these senior citizens who have contributed to the economy actively and to share their wealth of experience in the boards of public organisations. it will solve the more serious segment of our unemployment problem. there is no need to turn them into cleaners and sweeper or taxi drivers.