That would be the horrid fear of ordinary folks in the medieval times. However, it modern times the honour goes ‘Discounts and Governance’. Ordinary people, are stakeholders for corporations and the stewards have the fiduciary duty and entrusted to uphold the interest of their organisation.
In January earlier this year, Emir Mavani appointed as CEO Designate of FELDA Global Ventures Holdings Bhd (FGV) and helmed the responsibility for international business operations which amongst other things included the trading and marketing function of FGV (under Felda Marketing Services Sdn Bhd) .
Felda Marketing Services Sdn Bhd’s main function is to market and sell FGV’s Crude Palm Oil, as well as other palm oil derivatives such as palm olein.
Felda IFFCO Sdn Bhd is 50% owned JV company between FGV and an Indian company Allana family based in Dubai, UAE. The management is by the Allana family. Since the inception of the JV with them, the said company has been continuously losing money.
It is believed sometime in April 2013, Emir Mavani unilaterally approved an RM100 ringgit per ton discount (to market) of Crude Palm Oil to Felda IFFCO Sdn Bhd (FISB) for 40,000 tons per month for 12 months, ostensibly to support FISB and Felda IFFCO Oils Products Sdn Bhd’s packed products business.
Letter from CEO FELMA was issued to CEO IFFCO Syed Ridzwan Ahmed about the agreement between Mavani and Ridzwan on the discount around the same time.
At 40,000 tons at RM100.00 discount per ton for 12 months translates to RM48 million per annum. That is RM48million less income to FGV. That is not as interesting as the authority of the FGV Group President CEO has a discretionary limit of approval for only RM1 million.
For the record, Mavani only assumed the position of FGV Group President and CEO on 15 July 2013.
It is also believed that no approval from BoD of FGV was sought for the aforementioned discount even though the impact to the company was well beyond the Group President/CEO’s limit of RM 1 million, what more the CEO designate who unilaterally approved this discount.
Since the discount takes effect in late April, there has been 72,000 tons sold to FISB and FIOP. Which would amount to RM7.2million of unsanctioned company expenditure/discount.
Essentially the RM48 million per annum which accounts for 480,000 tons of CPO or 15% of FGV’s total CPO sales is a subsidy to Felda IFFCO since they control the management of the companies and sell through their own sales channels.
It is also believed that FGV Chairman Tan Sri Isa Samad has been informed about this. However, he is nonchalant about it.
What is more interesting, it is believed that there is an active MACC investigation on the matter since three weeks ago. Yet, Isa as the FGV Chairman did not do anything at BoD to rectify the matter. The very least, get Mavani to explain to the BoD on the matter.
Added to that fact, this is not the first time Mavani gave away discounts. The pig rearer Yunnan Huijia Ltd. of Kunming China was a scandal raised earlier. It was even raised by shareholders on the 26 June 2013 first FGV AGM. However, it does not show that Isa reprimanded nor made Mavani answer to the discount scandals so far.
There are issues of governance in these instances. Addendum to the the recent acquisitions made, at exorbitant prices.