The tale of the 2 Tuns, 5 Tan Sris & 4 Datos

On Thursday 2 September 2010, newly appointed President and CEO for the Sime Darby Group Dato’ Mohd. Bakke Mohd. Salleh met the ‘troops’ for the first time, in a ‘town hall’ meeting held at Sime Darby’s own convention centre in Bukit Kiara. It went very well and the men and women who are running the most powerful palm-oil-plantations-based conglomerate in the world had been cleared of a lot of ambiguities and uncertainties.

Everyone were glad that the only direction and way that the conglomerate which employs more than 100,000 persons and a group turnover of almost RM 33 billion, is up and forward.

Bakke and his executives are out to correct all the wrongs that have substantially damaged Sime Darby’s image recently. They are bullish with the growth that they can generate and confident that Sime Darby is able to double its take within five years time.

The figures look good if not impressive, despite of the RM 1.7 billion losses incurred from the Bakun, Qatar Project, Maersk Oil Qatar and the marine project in GCC states. The unaudited turnover for the financial year endid 30 June 2010 is RM 32, 951.6 million, up 6% from last year’s. Total assets are at RM 37, 926.2 million, up by RM 2, 4896.3 million from the previous corresponding period. Equity is valued at RM 21, 130.9 million although the subscribed paid up capital stood only at RM 3, 004.7 million. What is most impressive is that the current assets is at RM 18, 787.4 million, where the cash position is at RM 5, 033.3 million.

Plantations remained the mainstay of Sime Darby’s income contributing RM 10, 662 million in turnover and RM 1, 719 million in profits.  Industrial brought RM 7, 926.5 million to the table, with a cool RM 862.1 million recorded. Third is Motors Division which contributed to the Group sales of RM 7, 510.3 million with RM 178.5 million net income. The highest margin is Property Division which brought in RM 1, 407.5 million in turnover and at a net margin of 32.8% at RM 461.9 million.

Dato' Azhar Abdul Hamid, Tun Musa Hitam & Dato' Mohd. Bakke Mohd. Salleh

Everything is set for Bakke and his current team. For the plantations, the medium term strategic moves that previous EVP Dato’ Azhar Abdul Hamid (was the Group Acting President and CEO for an interregnum period 2 months) installed and planned have started to show results. Within the next five years, the 600,000 hectares of the ‘greenfield’s would be contributing to the income from the existing 400, 000 hectares of ‘brownfields’. New acquisitions would strengthen the plantations future income and growth.

Sime Darby is strengthening its business model in region, particularly China and Australia. Mostly in the industrial sector. The 100 year old conglomerate is also playing a prominent role in the utilities business in China, particularly in port and water management. More opportunities seems to be opened up for them, which include property development schemes in upcoming new growth area in Shangdong and Wifeng.

Never the less, all of these positive nodes should not impair our sight on the issues of ‘accountability’.  Pertaining to the accumulated losses of RM 1.7 billion attributed poor planning, project management and possibly criminal conduct and worsened with poor or possibly negligent reporting, even to the board level. Sime Darby already seen the ‘dismissal’ of Group CEO Dato Ahmad Zubir Murshid abruptly in May and former Sime Darby Engineering and Utilities boss Dato’ Shukri Baharom last year. It is not enough.

The stewards who have fiduciary duties over the conglomerate must be accountable. The board of directors (BOD) comprises of ‘illustrious members of the society and corporate community’, with some representing the shareholders. Having said that, despite of their professional training and aggregate vast amount of exposure and experiences amassed in various capacities through time, they deemed to fail their duties. The convenient blame is when Chairman Tun Musa Hitam told the press, “Management misled us and hid the truth”.

This is unacceptable.

They are members of the BOD. They have the right to ask questions and demand for answers. If the answers are not convincing enough, then they should talk to the various level of executives. They have an audit committe at the BOD level. They also have the right to interact with the external auditors.

Musa Hitam: Showing the gesture what needs to be done about the BOD?

All of these deliverables expected of the BOD are not without basis. The issues that lurk Sime Darby on the Bakun and oil and gas have been openly discussed in market. Even in publications. Including here in BigDogDotCom. Unfortunately, all of these fell out of the radar scope of the ‘illustrious members of the BOD’.

Are the members of the BOD felt that they are to high up and well placed in the society that they are indispensable? We are not sure. However, the BOD comprises of personalities such as former Deputy Prime Minister Tun Musa Hitam, former Chief Secretary to the Government and now PNB Chairman Tun Ahmad Sarji Abdul Hamid, former Bank Negara Assistant Governor Tan Sri Andrew Sheng, former Chief Secretary to the Government Tan Sri Shamsuddin Osman, former Director General of Education Tan Sri Wan Zahid Nordin, former PwC Executive Chairman and MICPA President Raja Tan Sri Arshad Raja Tun Uda and former SIRIM Director General and nuclear engineer Tan Sri Dr. Ir. Ahmad Tajudin Ali. This is accompanied by four other Datos namely former BIMB Supremo Dato’ Dr. Abdul Halim Ismail, prominent lawyer and former SUHAKAM Commissioner Dato’ Paduka Zaitoon Osman, Sime Darby veteran Dato’ Mohamed Sulaiman and a chartered accountant from Britain Dato’ Henry Sackville Barlow.

It is unbelievable these men and lady did not ask Zubir the right questions. Especially when losses that large must be accumulated through time. There are chartered accountants (Raja Arshad, Mohamed, Barlow), a seasoned banker (Dr Halim) and engineer in the BOD. Four of them were from the pre-Synergy Drive Sime Darby BOD. The very least, the progress and extension of the projects involved. What is most baffling weren’t they curious the development on these projects, Bakun, MOQ, QP and the marine project in QCC states?

How about the JV ventures with Brunsfield and Sunrise Bhd. and allowed the profits to be shared where else Sime Darby as a seasoned property development group and had all the resources to undertake these projects on its own?

The BOD must be accountable for these and display integrity. They have to go. If not all, the very least most of them. On the Sime Darby Energy and Utilies losses and scandals, 15 weeks ago here in BigDogDotCom we already demanded some of the BODs be sacked, which include Chairman Musa. No doubt Sime Darby did show some profits despite the accumulated losses of the four ‘sick’ projects. However, they are supposed to monitor all the developed controls and reporting system which were deemed to be matured and tested through time.

On 7 September 1981, Permodalan Nasional Berhad engineered the ‘dawn raid’ on the London Stock Exchange to ‘bring back’ ownership and control of what is now the Sime Darby Group. British companies which so much from Malaysian resources are now back in the hands of Malaysians, particularly the Malays. Then Prime Minister  Tun Dr Mahathir Mohamad personally paid attention to this carefully planned and clandestine ‘corporate reverse take-over’.

Chartered Accountant and British national Henry Sackville Barlow

So why is it that Sime Darby still maintain a Brit on the board, knowingly it has been almost 30 years since and Malaysians have been proven to do the job without them?

It is the right thing to do for the two Tuns, five Tan Sris and four Datos (with the exception of the CEO, the director from Indonesia Dr. Ariffin Mohamed Sirergar and the Company Secretary). If this is about ‘ego’, then it should have ended sometime back. No other organisation in the country of 600,000 registered companies which include Bank Negara and Petronas has a BOD with such ‘illustrious members of society’ to “be the steward and safeguard the interests of the shareholders”. And yet, they ‘failed’ the almost 9 million shareholders (this include the 8.9 million members of the ASB and ASN scheme, which the single largest shareholder of the Sime Darby Group).

If nothing is done soon, then Sime Darby will be known as “The Tale of the Two Tuns, Five Tan Sris and Four Datos” where arrogance, pomp and pageantry rules over virtues like integrity and accountability. The tale is about ‘great and illustrious men’ failing the Malaysian corporate scene.