Saturday, May 22, 2010
The entire Sime Darby Board must go
The only way to rescue Sime Darby Berhad now is to sack the entire Board, including chairman Tun Musa Hitam and to revamp its top management. To my mind, none of the divisional heads should remain. This is because they were all part of the decision-making process. They are collectively responsible for all the wrong-decisions, unlawful decisions, non-compliance of Corporate Governance, etc.
The Board of Directors of the expanded Sime Darby was appointed just before the Legal Day One of the merged entity on November 27, 2007. (Sime Darby, Golden Hope Plantations Berhad and Kumpulan Guthrie Berhad were merged). In another six months, that would be three years.
Therefore, the Board cannot claim ignorance to what Sime Darby has been doing. Legally, having no knowledge is no defence. Sime Darby's investment in Qatar dates back to 2006 and 2007. It only goes to show that the Board failed to keep in check the actions of the management or worst, was by-passed altogether. But one thing for certain, the Board had failed miserably in monitoring the projects entered into by the management.
The proposal to merge Sime Darby, Golden Hope and Guthrie was mooted by Sime Darby, then led by Datuk Seri Ahmad Zubir Murshid. At the point of the merger, all three companies were very profitable. In it's final year, Golden Hope made RM700 million and had embarked on a mission to increase its profits to RM1 billion by this year. That's half the profit the expanded Sime Darby is making now.
The exercise was called a merger because it was a Related Party Transaction. In actual fact, it was a Sime Darby take over. They did not call it a take over, because they would then be required to adhere to the stringent Take Over Code. If it was a take over, Permodalan Nasional Berhad as a major shareholder would not be able to exercise its voting right as it was a RPT.
I was then the General Manager of Group Corporate Affairs cum special Officer to the Group Chief Executive at Golden Hope. Therefore, I was privy to certain information.
I have every reason to believe that Tan Sri Ahmad Sarji Hamid (now Tun) who was then the Chairman of both Sime Darby and Golden Hope, was by-passed when the merger proposal was made to the Government. He was kept in the dark until the very last minute. I may be wrong here, but when confronted by the senior management of Golden Hope Tun Ahmad Sarji denied knowledge of the merger. His facial expression was genuine. It's either that or Tun Ahmad Sarji is a damn good poker player.
Datuk Seri Zubir did not want Golden Hope to know about the merger until after Tun Abdullah Ahmad Badawi, the then Prime Minister approved it. My point is this, if Datuk Seri Zubir could do things without the knowledge of his Chairman and his Board then, could he not do the same now.
The reason for keeping the planned merger a secret was simple. Datuk Seri Zubir knew that Golden Hope and Guthrie would not agree to it. To keep them in the loop would only give rise to messy debate. So the best thing is not to consult them at all. Get the Government to agree to it and then shove it down their throats.
In fact, to this day, most of the ex-Golden Hopers and Guthriens who joined Sime Darby wish the clock can be turned back. The merger was a big mistake. It failed from the very beginning, a non-starter so to speak. It is working against the country and the Government. The number of resignations at the Plantation Division is climbing by the day. Morale among the staff is a big issue.
A few days ago after announcing that Datuk Seri Zubir had been asked to go on leave pending the expiry of his contract in November, Tun Musa treated editors and bloggers to a sumptuous dinner and tried to explain his side of the story. Perhaps also to get them over to his side.
But things don't work that way.
So many things need explanation. They include:
1. Payment made to middlemen in dealing with the Chinese Government/projects in China
2. The projects awarded to the Brunsfield Group of Companies with/without the approval of the Board
3. Encroachment into the High Value Virgin Forest in Kalimantan which incurred the wrath of the Indonesian authorities. What was the total amount of money paid as compensation?
4. The RM18 million paid to one "Azeez". Read this.
5. The lavish lifestyle of certain people, globetrotting with private jet, etc...
6. The sale of the land at USJ Elite Exit (now being developed by a private company - MCT). At what price was this land sold and what was its price when Sime Darby bought it. What is the market price now? Why was the land sold anyway? Is it to show income in an attempt to make losses elsewhere look small?
7. The false statement made in relation to the projects in Qatar in 2008 in response to the posting by "Sime Darby Watch". Sime Darby issued a statement denying the cost over-run. It is now evident that the statement was issued to mislead the authorities including the Securities Commission and Bursa Malaysia as well as the shareholders and the general public.
As an Amanah Saham Nasional account holder, I call upon the Government to set up an independent committee to re-audit the company accounts over the last five years.
I am not at all convinced that the negative impact on Sime Darby's balance sheet this year can be capped at RM964 million. Someone try and convince me please.
And I do hope PNB would not use the Sime Darby loss as an excuse to pay lesser ASN/ASB dividends this year.
As things fall into place, I am now beginning to wonder whether the merger was deliberately planned to "hide" some of Sime Darby's earlier indiscretion/wrongdoings. If the merger did not take place, the losses in Qatar and Bakun, would have impacted Sime Darby in a far greater way. Perhaps, someone saw the merger as the only solution to cushion the impact. According to The Star, Sime Darby's market capitalisation was about RM71 billion in January 2008, two months after the merger. Its Market Capitalisation is now RM52 billion and dwindling.
What Sime Darby is left with now is the cash and assets it took from Golden Hope and Guthrie.
Next posting: The four senior executives who willl have to face the music...