Petronas pandemonia premonition


Recently, some pro-UMNO and establishment blogs painted the perception that Petronas President and CEO Tan Sri Hassan Merican as falling out of favour from Prime Minister VI Dato’ Seri Mohd. Najib Tun Razak. They suggested that Hassan either should leave or be made to leave prematurely, for blatantly defying wishes (more like ‘instructions’) of PM Najib.

PM Najib was insistant of appointing former Special Function Officer and currently Ethos Consulting CEO Omar Ong as a Non Executive Director of Petroliam Nasional Bhd (Petronas). Despite two board of directors (BOD) meeting rejecting the ‘request’, PM Najib ‘forcefully installed’ Omar in.

The repercussion of Omar’s appointment into Petronas BOD is far reaching. For starters, Omar was a Petronas sponsored scholar who had a bond to complete for a term of service but failed to do so. He prematurely left just under two years of service in February 1997 to join Multimedia Development Corporation (MDeC) as the Executive Assistant to the Chairman. Later he left MDeC to join McKinsey & Co. From McKinsey, he formed Ethos Consulting with Dr Liew Boon Horng in 2002. During this time, Petronas issued a letter of demand for the remaining value of the bond yet to be completed.

Petronas has a policy to not admit personnel who left, to seek greener posture. As a matter of principle, the admission of Omar back into Petronas is morally and ethically wrong. Despite the admission is not as an employee but instead a member of the BOD, it can be seen as Petronas failed to uphold its own policy and ruling.

The amount sought by Petronas and awarded by the Shah Alam courts is not small. It is almost RM 200,000.00.

The appointment into the BOD is deemed demoralising amongst Petronas people. Not only a loan bond defaulter who was subjected to a court judgment and still ignored his dues, later he was ‘rewarded’ with a very strategic position in Petronas.  This could send a message within Petronas that a ‘diliquent’ not necessarily needed to be reprimanded but instead rewarded, as long as one could earn a political patronage.

Despite being a wholly owned Government corporation, the organisation remained apolitical. Petronas management comprises professionals, which include top civil servants. Never has Petronas admitted a political appointee. PM Najib insistant of Omar’s appointment to the BOD could be perceived as Petronas being made serving political needs. It can also send the signal and set a precedence that Petronas personnel are free to breach any rule and/or directive, as they like.

Petronas is one of if not the best example of a GLC which has developed a formidable succession plan. The processes, work culture and dynamics and productivity have reached a point where results can clearly be seen,  tactically and strategic. Bringing in ‘outsiders’ for a short term grooming process to take over as the CEO will definitely create ripples within the long serving executives of the state oil corporation. Some actually have illustrious service track records.

Loyalty and adhering to traditions are virtues that made a lot of corporations where they are today.

Oil and gas industry is the most productive sector in the Malaysian economy today. The productivity is glaring amidst regional and global economic slwodown. Hence, the sluggish Singapore’s economy has now set their aim to capture businesses being developed in Malaysia, which Petronas is taking the lead. Some even believed that this is one of the agenda to bring Omar into the BOD.

The excuse that Eisenhower Foundation Fellowship Alumni Omar was ‘sent’ by PM Najib is to look into  ‘corporate governance’. How and why Petronas needed an extra independent director to oversee the ‘improvement of governance’ is not clear yet. So far, Petronas’s results have been far more than impressive. Unlike under other GLCs, for instance Khazanah Holdings Bhd., The investment arm of the Malaysian Government is known for spending lavishly and make bad returns despite  ‘GLC restructuring master’ Tan Sri Nor Mohamed Yackop (now Minister in charge of EPU) specific instructions on ‘ROI’ and bullish obsession on ”value creation’. Some of the dealings could only be perceived as Malaysians being shorthanged. For the record, Khazanah Holdings has the fondness of outsourcing their consultancy jobs to firms like McKinsey and Co.

As is, Petronas people are not paid like the oil majors, despite outstanding success stories. Needless to say, their productivity still remain high. ‘Rumblings  the interior’ is very much the flavour amongst her 23,000 personnel. Of course, Petronas has lost a stream of good oil and gas professionals due to the ‘below market’ remuneration packages for the lucrative industry.

These ‘interventions’ will have a pessimistic reaction, if not adverse for Petronas. Thoroughbred Petronas people would definitely be affected. The boost morale is not an easy task. For a corporation which has a turnover of RM 254 billion and almost RM 90 billion EBITDA, mutiny is something the Federal Government should want to avoid at all cost. That result is analitically 60% of the Malaysian GDP (PPP adjusted) for 2008.

In sundry, recent developments are premonition to pandemonium within Petronas. PM Najib and Federal Government should really think through deeply.

Published in: on November 16, 2009 at 18:09  Comments (29)