Saturday December 13, 2008
Are some CEOs worth their huge pay packets?
By TEE LIN SAY
Nazir the highest-paid GLC CEO
WHILE it was an issue that started as a financial cry for help, the automakers bailout plan in the US soon became an issue of accountability.
After being criticised during their last trip for arriving in Washington in corporate jets, not only did the chief executives of Ford, GM and Chrysler drive to the nation’s capital in hybrid cars, but they agreed to accept annual salaries of US$1 if the US Congress okayed their bailout plan. The pledges were part of the automaker’s proposal delivered to Congress, for the Detroit 3’s request to win a piece of US$14bil in emergency loans.
Huge sacrifices are made by these corporate chieftains in their aim to prevent the auto companies from collapsing, saving thousands of factories and millions of related jobs in the US recession.
Meanwhile, the proposed US$14bil bailout plan has been opposed by the US Senate, raising the spectre of an industry collapse.
Abdul Wahab Jaafar Sidek
The question arises: will Malaysian corporate leaders do the same should they be faced with the same grim scenario?
CEOs’ compromise
As the economy grapples with an enduring credit crisis, paycuts by senior executives are expected to be more widespread.
Last month, it was announced that Singapore’s Prime Minister Lee Hsien Loong will lose 19% of his salary because of the global economic turmoil but will still earn almost US$2mil a year.
South-East Asia’s biggest property developer CapitaLand has also announced that its chief executive Liew Mun Leong will take a pay cut of 20% as part of company-wide measures to cope with a global downturn.
Moving into 2009, as public-listed companies (PLCs) cut cost and freeze recruitment, many expect a similar stance to be taken by their chief executive officers (CEOs).
“It will be a case of leadership by example. Times are bad, so the CEO makes a sacrifice to show his sincerity to his troops. There is also a likelihood that a stronger trend of performance-based bonuses will emerge. The key performance index (KPI) will be a stronger measurement for rewarding staff,” says a human resource consultant.
He adds that in recessionary times, sooner or later, the issue of headcount will transpire.
A director of a consultancy firm says that for now, Malaysia has yet to see any retrenchment or voluntary separation schemes.
Minority Shareholder Watchdog Group CEO Abdul Wahab Jaafar Sidek says that if there is any retrenchment, it has to be carried out smoothly, quickly and cordially, with least disruption to business.
“The CEOs and executive directors should be the first to make sacrifices and if need be, even forgo their directors’ fees,” he says.
Abdul Wahab says that what is important is how the CEO can raise productivity and efficiency during hard times under his leadership. “The outstanding CEOs must be rewarded appropriately. For, in difficult economic situation there will be some outstanding CEOs who can still shine.”
Are Malaysian CEOs fairly remunerated?
Reporting compensation of CEOs on an individual basis is the practice in the United States, Britain and Australia.
Generally in Asia, share owners do not know exactly how much corporate funds are going to the individuals entrusted to run the business. Reasons for this are a lack of regulatory measures and inadequate information in financial reports.
In Malaysia, while remuneration to company directors is listed on the annual report, it is hard to gauge as salaries of its directors are lumped together.
Most of the PLCs disclose the directors’ remuneration in bands.
“Unless there is greater transparency on the amount paid to directors or CEO, shareholders will find it difficult to assess whether they are fairly compensated, and more importantly whether the remuneration is linked to corporate and individual performance,” says Abdul Wahab.
There are also instances where the CEOs are not members of the board, therefore their remuneration is not disclosed in the annual report.
“In my opinion, the renumeration packages of Malaysian CEOs are quite fair. Even in good times, it isn’t exorbitant, hence in bad times, there isn’t likely to be a huge pay cut,” says the director of a consulting firm.
Malaysian CEOs (after converting to dollar terms) are regarded as the lowest paid in Asia Pacific, says a director of the consulting firm, adding that the salaries of CEOs who run big government linked companies are “honourably low and hardly exciting.”
At the same time, he opines that the American model of richly rewarding their CEOs as a bit of an overkill.
“In America, everybody wants to be a CEO, because the packages are so lucrative. Yet during bad times, or when earnings are poor, the CEO is punished ruthlessly. That is why they say CEOs in the US live quarter to quarter!”
He adds that there are many factors that determine a decent CEO package. To link the CEO’s pay package to the economic environment could be a double-edge sword.
“For instance, if Malaysian plantation CEOs were to tie their salaries to their KPIs, would this mean that when CPO prices increase three-fold, there would also be a three-fold increase in the CEO’s pay?” he asks.
Likewise in bad times, does the CEO deserve a big pay cut when it might be market forces bringing demand down?
Abdul Wahab makes some interesting observations from its MSWG-NUBS Corporate Governance Survey 2008.
“It was surprising to find instances of good Samaritans on the boards of corporate Malaysia in the context of directors’ remuneration,” he says.
The survey noted that two companies did not pay salary to their executive directors (EDs) for the financial year 2007. They are Integrax Bhd and Borneo Oil Bhd.
While the ED of the former only received directors’ fees even though the company was reporting a profit, the ED of the latter company – which reported a loss – was remunerated substantially with share-based payments.
In the case of Sinora Industries Bhd, the ED was not remunerated at all even though the company reported operating profit for the year.
Invisible perks
Many have surely heard of CEOs who charge meals costing a week’s wages to their company’s expenses.
Or those that travel business class and stay in luxury hotels? These are perks which are clearly not seen in annual reports.
The human resource consultant says that he does not see many PLCs abusing their invisible perks.
“In reality, it happens less nowadays. Especially for executives in listed companies, they are pretty wary of being scrutinised for such things. Even family-owned businesses are subject to public disclosures.”
“I think CEOs would rather demand better bonuses, stock options or fringe benefits for themselves. As a CEO of a public listed company, there is a reputation to maintain,” he says.
Wahab agrees that flagrant abuses are not rampant in Malaysia. He sums it up by saying that while there is a need to pay CEOs attractively to run the company successfully, there is also a need to link rewards to corporate and individual performance.
BUMIPUTRA-COMMERCE Holdings Bhd’s chief Datuk Nazir Razak, stood out as the highest paid CEO with a disclosed remuneration of RM9.35mil for 2007. This doesn’t come as a surprise considering Nazir is seen as the single force behind CIMB’s dominance and aggressive venture into Thailand, Indonesia and China.
The salaries of other GLC heads pale by comparison. In 2007, the other highest paid CEOs in GLCs include the then Maybank CEO Tan Sri Amirsham Abdul Aziz (RM2.71mil); Sime Darby Bhd’s Datuk Seri Ahamd Zubir Murshid (RM2.05mil); Bursa Malaysia Bhd’s Datuk Yusli Mohamed Yusoff (RM1.97mil) and Boustead Holdings Bhd’s Tan Sri Lodin Wok Kamaruddin (RM1.85mil).
For his efforts in turning around Malaysia Airlines, Datuk Seri Idris Jala received a remuneration of between RM950,000 and RM1mil in 2007.
It would appear that many of the GLC heads receive lower pay compared to their non-GLC peers.
The highest paid CEO in Corporate Malaysia continues to be Genting Bhd’s Tan Sri Lim Kok Thay at RM86.5mil. Other highly paid heads are those from family-owned businesses such as IOI Corp Bhd, OSK Holdings Bhd and YTL Corp Bhd.
Astro All Asia Network Plc’s group CEO Ralph Marshall received RM3.4mil while Puncak Niaga Holdings Bhd executive chairman Tan Sri Rozali Ismail received RM5.2mil.
It is interesting to note that many main board and second board companies pay their CEOs less than RM400,000 a year. These include Mycron Steel Bhd, Scientex Packaging Bhd and Jobstreet Corp Bhd among others.
Saturday December 13, 2008
How to become very rich in Malaysia
Connections and the ability to flip assets can get you going places
If you have ever wondered how to get rich in Malaysia – fabulously rich and very quickly at that – here’s a model that you might want to look at very closely. Not easy to do but if you do have a couple of projects in the bag, it will set you up for several lifetimes.
First you need connections – strong ones, the higher the better and if it goes right up to the top all the better. You need this because you need to convince the powers that be that your projects are good.
But you might ask if your projects are so good, why do you need connections? Why don’t you just go out and execute? Good questions, those. Here’s the answer - you need the state to give you something to do the deal that will help the nation.
Still can’t figure it out? See, it’s like this. You want to help the country, right? The country needs say a port. But you can’t build a port just like that. You need land to build a port. You tell the state or federal government you need land – cheap land, preferably free to build the port.
Or to take another example, you want to help the country by building a power plant. But look, you need land too and not only that you need the power to be sold. So you want an agreement – an iron-clad one to sell the power to Tenaga Nasional and to pass through all costs.
You see, that’s your reward as an entrepreneur – you get someone else to build the power plant, they guarantee the performance of the plant and someone else guarantees to buy your power and pay for all your costs. Nice deal? You bet. Billionaires have been made that way.
Or you may want to start an air hub. If you are persuasive enough, you can even convince the government to compulsorily acquire the land and sell it to you cheap. Once you have cheap land, lucrative contracts and concession agreements, the sky’s the limit.
Let’s take it a step further. If you want to realise the value of all of these things that you have and still keep control of them, it’s nice to have a listed company into which you can inject them. Inject one asset for shares and you gain control of the company.
And then inject others over the years for cash, taking the money out of the company. Who says you can’t have your cake and eat it too?
Do it right and get a flow of assets to inject in (you can do anything with discounted cash flow valuations – just change the discount rate, and presto, the value changes!), and you get a tidy flow of profits and cash into your personal accounts over the years. I mean a really tidy flow.
Just how much can you make this way, you ask? Why don’t you take a guess first? Did you say RM500mil? Guess again. RM1bil? How about five times that and you may be getting into the right order of magnitude.
One Tan Sri Syed Mokhtar Albukhary actually made some RM4.5bil that way - actually more because he still controls the listed company. (MMC’s latest RM1.7bil deal irks investors7) We are not saying he is the only one, which makes your chances of joining the ranks better – if you are connected to high places that is.
But then again, if things change – and that’s still a big ‘if’ – you might not find it so easy anymore.
P. Gunasegaram is managing editor of The Star. He thinks it is high time we changed the way we did business
Saturday December 13, 2008
Even old men need to keep growing
Comment by Roshan Thiran
CALL it crazy, paranoia or kiasu but for Toyota employees it’s a crisis if they do not create improvement each day. The “kaizen mind” means there is only one way to move – forward. So everyday, whether you’re a line worker or management executive, you have to find ways to change what you’re doing so you do it better. In fact some years back, Hiroshi Okuda, the then chairman of Toyota Motor Corp proclaimed: “Failure to change is a vice.”
In less than two decades, Toyota has gone from a laughing stock in America to the world’s largest and most successful automobile manufacturer. It consistently outsells Ford and General Motors – thoroughbred American brands who are struggling to stem market share losses – and its Lexus was the top-selling luxury brand in America for six years consecutively.
It’s borderline obsession but given the results, I’m not about to knock it!
Kaizen is not a proprietary Toyota secret. Change, growth, improvement, innovation … these are just different monikers for essentially the same thing – keep changing the game and keep moving, improving and growing. Grow, grow, grow. Every successful company is dedicated to this pursuit of continuous growth and improvement, and the same can be said of great leaders and great people as well.
In my experience working and observing great leaders at GE and Johnson & Johnson in the US, Europe and more recently in Asia, one key trait of great leaders is their appetite for continuously learning and growing. Leaders never stop learning and growing because when that happens, they stop being leaders. Great leaders are always listening and watching in the hope of learning new ideas, new thoughts and discovering new truths and realities for themselves. Great leaders, regardless of their age, always have a hunger for learning and this drives their growth and that of their organisations.
The desire and ability to keep growing has always been the hallmark of leadership. I saw this firsthand from Jack Welch’s initial rejection of the Internet to his total embracement of it.
Now, Jack never was a great fan of the World Wide Web. He may have understood its strategic value and implications to the future but he never really showed it vis-a-vis his numerous initiatives and strategic directions. Of course, this was back in the early nineties when General Electric was very much a brick and mortar business dealing with physical estates like appliances, jet engines and plastics, and providing services like financing, credit cards and media.
Outside bits of NBC (the media arm) and GE Capital (its then financial services arm), GE at large showed no appetite for the Internet or leveraging it.
Then in the late 90s, Jack made a drastic about-turn and completely changed its web game and strategy. One day, he asks GE CIO Gary Reiner to provide someone from the group’s IT department to be sent over to teach him about the Internet. I think many of the IT folks in Fairfield Connecticut (GE’s HQ in the US) feared for their lives! What if Jack asked them an IT question that they could not answer. But someone volunteered and started teaching Jack about the Internet.
For a few weeks, Jack breathed and lived the Internet. When Jack learns, he really learns. He wasn’t interested to just shop online or dabble in virtual reality; he wanted to know the whole works. You have to remember that at the time, Jack was just a few years to retirement. It was in the late 90s and he was about to hand the reins of the company to a new guy named Jeff Immelt.
He had just transformed GE into the most admired company in the world and he himself was declared the most respected CEO in the world. Yet, he didn’t think he was above learning something new. He showed amazing appetite to learn about the Internet and within a few months could get away with talking like one of the tech guys!
When news made its way through the GE grapevine, most of us couldn’t understand why an “old” man would bother learning at this stage of his life. He had after all made it in life, so why bother? Jack could have easily retired on a high note and let the next guy figure out the Internet and its implications. But that’s the thing about great leaders – they never know when to stop learning. They never stop learning.
What precipitated this change of heart? Online shopping, apparently. The story, as the legend goes, was that Jack had gone home one day and found his then wife, Jane, on the computer. It was so uncharacteristic of her that Jack had to find out what she was doing. As it turns out, she was shopping. He could not believe that you could shop online and so she showed him how it worked by ordering a set of golf clubs for him (so the story goes!). That just blew him away.
Immediately Jack wanted to learn about the power of the Internet. And he then proceeded to set up new companies with the sole purpose of “destroying” their bricks and mortar equivalent by building new Internet-based businesses. In fact, he named them “DestroyYourBusiness.com”!
This was implemented across all GE business units like “DestroyYourBusiness.com_Plastics” and so on. The new CEOs of these dot-com entities were tasked with converting the sales functions of the traditional GE businesses from old methods to e-commerce.
More than five years on, GE’s aviation business, its biggest brick and mortar business, now sells almost all its spare parts and a number of other items online, thanks to DestroyYourBusiness.com Aviation. Not many people would have thought aircraft engine sales could be done online but it happened and they sell millions in a click! Functions like parts ordering to customer service and even dealings with vendors are done through GE’s IT infrastructure.
Jack’s desire to learn is insatiable. At a few years shy of retirement, he was still willing to shake things up and push the company towards new, untested waters. Is it any wonder that his name is almost synonymous with leadership? It all really begins with having a constant hunger to learn and be willing to learn from anyone … even from your spouse! Jack did. Yes, even old men need to keep growing.
> Roshan Thiran is the director of Global Talent Management for Johnson & Johnson. He also spent 12 years working with General Electric in the US, Europe and Asia helping develop leaders. He has a passion for helping people fulfill their potential and purpose and believes there is a science to developing leaders.
Saturday December 13, 2008
Leadership training for rural teens
By James Foo
It is rare that leadership development programmes are tailored specifically for the young. But a camp held in Port Dickson recently saw 80 youngsters between the ages of 14 and 18, many of whom came from rural areas or welfare homes, being given the opportunity to hone their leadership skills.
The “Driving It Out, Doing the Extreme!” (DIODE) Youth Leadership Camp was held from Dec 1-6 at the Eagle Ranch, Port Dickson.
The camp was conducted by Leadernomics, a company specialising in leadership development and talent management.
Developing leadership: Italian Technologies CEO Roberto Galeotti (left) giving feedback and advice to participants on their projects.
Malaysia Airlines and Astro All Asia Networks were among the corporations that supported this not-for-profit project by each sponsoring 10 children from various orphanages.
As the name of the camp suggests, participants, in teams of 10, were driven to partake in activities carefully designed to encourage the development of leadership traits through intensive, non-biased interaction among team members of differing races and backgrounds.
Teams were constantly pitted against each other to develop a healthy competitive spirit in activities such as the “DIODE Apprentice” and “Challenge Day”.
The DIODE Apprentice, modelled after Donald Trump’s The Apprentice series, and the “Challenge Day” were corporate-style programmes that were integral parts of the camp.
The programmes were aimed at exposing the children to the fundamentals of business and making presentations, besides giving them invaluable exposure to CEOs and business leaders.
Young, successful entrepreneurs such as Aidan Chew, winner of the first Nescafe Kick Start, were roped in to inspire entrepreneurship at these special programmes.
Other CEOs who were part of the CEO panel were Roberto Galeotti, a veteran former GE CEO, and Pete Foo, CEO of YellowBrick Road.
Not only were there learning and fun and games, there were also moments to reflect and learn from failure, another key theme of the camp. Each day, the “My Diary” segment, a one-hour period for the youths’ self reflection, was held at the conclusion of each day’s activities to reinforce the day’s lessons.
In the four days leading up to the “Challenge Day” segment, the teams were assigned projects to work on.
Developing leadership: Leaderonomics IT & Multimedia leader John Thomas teaching the youth how to use technology in their growth and development.
“These projects included designing a website, producing a DIODE newsletter, and putting together a proposal for youth development in schools and helping youths better themselves.
SuLin Lau, a business leader from renowned advertising agency BBDO, flew down from Singapore to be a part of the “Challenge Day” adjudication panel and was amazed at how well the youths presented their ideas and proposals.
The camp will be held four times a year beginning next year.
It aims to provide a platform for youths aged between 14 and 18 to increase their confidence levels and competence as leaders of the future.
Each camp will take place for six days and five nights, with full board, accommodation and course materials that include presentation handouts, stationery and other materials on leadership.
For queries on the next DIODE camp call Geraldine Sebastian at 012-289 6461 or e-mail geraldine.sebastian@leaderonomics.com
Friday December 12, 2008
Responsibility of doing business the right way
Everything that is done must be of high quality
WHAT is the business of business?
The answer to this question may seem obvious. We are told it is to maximise shareholder value. But what exactly does this apparently simple statement mean? Are companies supposed to maximise shareholder value at the expense of customers, employees and the community?
Are we talking about the short term or the long term, and what exactly do we mean by short and long term? Is it okay for companies to break the law, pay fines and get away with doing this again and again as long as the fines they pay are less than the profits they make by breaking the law? Are we talking about maximising profits or some cash-based measure instead?
As directors and senior managers think through the implications of these questions, it is clear that maximising shareholder value is not as straightforward an objective as might have seemed at first sight.
The famous Johnson & Johnson Credo, written in 1935 by General Robert Wood Johnson, puts satisfying customers first, respecting employees second, being a good citizen third and giving the shareholders a fair return last:
“We believe our first responsibility is to the doctors, nurses and patients, to mothers and fathers and all others who use our products and services. In meeting their needs, everything we do must be of high quality. We must constantly strive to reduce our costs in order to maintain reasonable prices. Customers’ orders must be serviced promptly and accurately. Our suppliers and distributors must have an opportunity to make a fair profit.
“We are responsible to our employees, the men and women who work with us throughout the world. Everyone must be considered as an individual. We must respect their dignity and recognise their merit. They must have a sense of security in their jobs. Compensation must be fair and adequate, and working conditions clean, orderly and safe. We must … help our employees fulfil their family responsibilities. Employees must feel free to make suggestions and complaints. There must be equal opportunity for employment, development and advancement for those qualified. We must provide competent management, and their actions must be just and ethical.
“We are responsible to the communities in which we live and work ... We must be good citizens – support good works and charities and bear our fair share of taxes. We must encourage civic improvements and better health and education. We must maintain in good order the property we are privileged to use, protecting the environment and natural resources.
“Our final responsibility is to our stockholders. Business must make a sound profit. We must experiment with new ideas. Research must be carried on, innovative programmes developed and mistakes paid for. New equipment must be purchased, new facilities provided and new products launched. Reserves must be created to provide for adverse times. When we operate according to these principles, the stockholders should realise a fair return.”
For a better answer to what is the business of business, look at why entrepreneurs start their companies. When asked, they do not talk about shareholders or maximising profits.
Instead they talk about the ideas they believe will change the world and how they want to make a difference.
Akio Morita, founder of Sony and father of the Walkman, wanted his engineers to make a product that would allow his daughter to listen to music as she walked to school. He wanted simply to make a difference to his daughter’s life.
Steve Jobs had a vision of a computer in every home when he and Steve Wosniak set up Apple.
Datuk Seri Tony Fernandes talked about the revolution in travel he wanted to bring to Malaysians who had never been in a plane when he founded AirAsia.
Henry Ford wrote this when he changed all of our lives by creating the mass produced motor car: “I will build a motor car for the great multitude … it will be so low in price that no man making a good salary will be unable to own one – and enjoy with his family the blessing of hours of pleasure in God’s great open spaces… and we will give a large number of men in employment at good wages.”
No mention of shareholders.
Peter Drucker makes the point even more clearly: “It is the customer who determines what a business is. For it is the customer, and he alone, who through being willing to pay for a good or a service, converts economic resources into wealth, things into goods…” (Drucker P, The Practice of Management, p35)
Yet we cannot say that all that matters is satisfying the customer. To do that would be at the expense of the other three key stakeholders: employees, community and shareholders. I will deal with them in turn in my next articles.
John Zinkin is CEO of Securities Industry Development Corp (SIDC). He believes that people should put the soul back into business.
We welcome readers’ feedback. Please email to starbiz@thestar.com.my
Are some CEOs worth their huge pay packets?
By TEE LIN SAY
Nazir the highest-paid GLC CEO
WHILE it was an issue that started as a financial cry for help, the automakers bailout plan in the US soon became an issue of accountability.
After being criticised during their last trip for arriving in Washington in corporate jets, not only did the chief executives of Ford, GM and Chrysler drive to the nation’s capital in hybrid cars, but they agreed to accept annual salaries of US$1 if the US Congress okayed their bailout plan. The pledges were part of the automaker’s proposal delivered to Congress, for the Detroit 3’s request to win a piece of US$14bil in emergency loans.
Huge sacrifices are made by these corporate chieftains in their aim to prevent the auto companies from collapsing, saving thousands of factories and millions of related jobs in the US recession.
Meanwhile, the proposed US$14bil bailout plan has been opposed by the US Senate, raising the spectre of an industry collapse.
Abdul Wahab Jaafar Sidek
The question arises: will Malaysian corporate leaders do the same should they be faced with the same grim scenario?
CEOs’ compromise
As the economy grapples with an enduring credit crisis, paycuts by senior executives are expected to be more widespread.
Last month, it was announced that Singapore’s Prime Minister Lee Hsien Loong will lose 19% of his salary because of the global economic turmoil but will still earn almost US$2mil a year.
South-East Asia’s biggest property developer CapitaLand has also announced that its chief executive Liew Mun Leong will take a pay cut of 20% as part of company-wide measures to cope with a global downturn.
Moving into 2009, as public-listed companies (PLCs) cut cost and freeze recruitment, many expect a similar stance to be taken by their chief executive officers (CEOs).
“It will be a case of leadership by example. Times are bad, so the CEO makes a sacrifice to show his sincerity to his troops. There is also a likelihood that a stronger trend of performance-based bonuses will emerge. The key performance index (KPI) will be a stronger measurement for rewarding staff,” says a human resource consultant.
He adds that in recessionary times, sooner or later, the issue of headcount will transpire.
A director of a consultancy firm says that for now, Malaysia has yet to see any retrenchment or voluntary separation schemes.
Minority Shareholder Watchdog Group CEO Abdul Wahab Jaafar Sidek says that if there is any retrenchment, it has to be carried out smoothly, quickly and cordially, with least disruption to business.
“The CEOs and executive directors should be the first to make sacrifices and if need be, even forgo their directors’ fees,” he says.
Abdul Wahab says that what is important is how the CEO can raise productivity and efficiency during hard times under his leadership. “The outstanding CEOs must be rewarded appropriately. For, in difficult economic situation there will be some outstanding CEOs who can still shine.”
Are Malaysian CEOs fairly remunerated?
Reporting compensation of CEOs on an individual basis is the practice in the United States, Britain and Australia.
Generally in Asia, share owners do not know exactly how much corporate funds are going to the individuals entrusted to run the business. Reasons for this are a lack of regulatory measures and inadequate information in financial reports.
In Malaysia, while remuneration to company directors is listed on the annual report, it is hard to gauge as salaries of its directors are lumped together.
Most of the PLCs disclose the directors’ remuneration in bands.
“Unless there is greater transparency on the amount paid to directors or CEO, shareholders will find it difficult to assess whether they are fairly compensated, and more importantly whether the remuneration is linked to corporate and individual performance,” says Abdul Wahab.
There are also instances where the CEOs are not members of the board, therefore their remuneration is not disclosed in the annual report.
“In my opinion, the renumeration packages of Malaysian CEOs are quite fair. Even in good times, it isn’t exorbitant, hence in bad times, there isn’t likely to be a huge pay cut,” says the director of a consulting firm.
Malaysian CEOs (after converting to dollar terms) are regarded as the lowest paid in Asia Pacific, says a director of the consulting firm, adding that the salaries of CEOs who run big government linked companies are “honourably low and hardly exciting.”
At the same time, he opines that the American model of richly rewarding their CEOs as a bit of an overkill.
“In America, everybody wants to be a CEO, because the packages are so lucrative. Yet during bad times, or when earnings are poor, the CEO is punished ruthlessly. That is why they say CEOs in the US live quarter to quarter!”
He adds that there are many factors that determine a decent CEO package. To link the CEO’s pay package to the economic environment could be a double-edge sword.
“For instance, if Malaysian plantation CEOs were to tie their salaries to their KPIs, would this mean that when CPO prices increase three-fold, there would also be a three-fold increase in the CEO’s pay?” he asks.
Likewise in bad times, does the CEO deserve a big pay cut when it might be market forces bringing demand down?
Abdul Wahab makes some interesting observations from its MSWG-NUBS Corporate Governance Survey 2008.
“It was surprising to find instances of good Samaritans on the boards of corporate Malaysia in the context of directors’ remuneration,” he says.
The survey noted that two companies did not pay salary to their executive directors (EDs) for the financial year 2007. They are Integrax Bhd and Borneo Oil Bhd.
While the ED of the former only received directors’ fees even though the company was reporting a profit, the ED of the latter company – which reported a loss – was remunerated substantially with share-based payments.
In the case of Sinora Industries Bhd, the ED was not remunerated at all even though the company reported operating profit for the year.
Invisible perks
Many have surely heard of CEOs who charge meals costing a week’s wages to their company’s expenses.
Or those that travel business class and stay in luxury hotels? These are perks which are clearly not seen in annual reports.
The human resource consultant says that he does not see many PLCs abusing their invisible perks.
“In reality, it happens less nowadays. Especially for executives in listed companies, they are pretty wary of being scrutinised for such things. Even family-owned businesses are subject to public disclosures.”
“I think CEOs would rather demand better bonuses, stock options or fringe benefits for themselves. As a CEO of a public listed company, there is a reputation to maintain,” he says.
Wahab agrees that flagrant abuses are not rampant in Malaysia. He sums it up by saying that while there is a need to pay CEOs attractively to run the company successfully, there is also a need to link rewards to corporate and individual performance.
BUMIPUTRA-COMMERCE Holdings Bhd’s chief Datuk Nazir Razak, stood out as the highest paid CEO with a disclosed remuneration of RM9.35mil for 2007. This doesn’t come as a surprise considering Nazir is seen as the single force behind CIMB’s dominance and aggressive venture into Thailand, Indonesia and China.
The salaries of other GLC heads pale by comparison. In 2007, the other highest paid CEOs in GLCs include the then Maybank CEO Tan Sri Amirsham Abdul Aziz (RM2.71mil); Sime Darby Bhd’s Datuk Seri Ahamd Zubir Murshid (RM2.05mil); Bursa Malaysia Bhd’s Datuk Yusli Mohamed Yusoff (RM1.97mil) and Boustead Holdings Bhd’s Tan Sri Lodin Wok Kamaruddin (RM1.85mil).
For his efforts in turning around Malaysia Airlines, Datuk Seri Idris Jala received a remuneration of between RM950,000 and RM1mil in 2007.
It would appear that many of the GLC heads receive lower pay compared to their non-GLC peers.
The highest paid CEO in Corporate Malaysia continues to be Genting Bhd’s Tan Sri Lim Kok Thay at RM86.5mil. Other highly paid heads are those from family-owned businesses such as IOI Corp Bhd, OSK Holdings Bhd and YTL Corp Bhd.
Astro All Asia Network Plc’s group CEO Ralph Marshall received RM3.4mil while Puncak Niaga Holdings Bhd executive chairman Tan Sri Rozali Ismail received RM5.2mil.
It is interesting to note that many main board and second board companies pay their CEOs less than RM400,000 a year. These include Mycron Steel Bhd, Scientex Packaging Bhd and Jobstreet Corp Bhd among others.
Saturday December 13, 2008
How to become very rich in Malaysia
Connections and the ability to flip assets can get you going places
If you have ever wondered how to get rich in Malaysia – fabulously rich and very quickly at that – here’s a model that you might want to look at very closely. Not easy to do but if you do have a couple of projects in the bag, it will set you up for several lifetimes.
First you need connections – strong ones, the higher the better and if it goes right up to the top all the better. You need this because you need to convince the powers that be that your projects are good.
But you might ask if your projects are so good, why do you need connections? Why don’t you just go out and execute? Good questions, those. Here’s the answer - you need the state to give you something to do the deal that will help the nation.
Still can’t figure it out? See, it’s like this. You want to help the country, right? The country needs say a port. But you can’t build a port just like that. You need land to build a port. You tell the state or federal government you need land – cheap land, preferably free to build the port.
Or to take another example, you want to help the country by building a power plant. But look, you need land too and not only that you need the power to be sold. So you want an agreement – an iron-clad one to sell the power to Tenaga Nasional and to pass through all costs.
You see, that’s your reward as an entrepreneur – you get someone else to build the power plant, they guarantee the performance of the plant and someone else guarantees to buy your power and pay for all your costs. Nice deal? You bet. Billionaires have been made that way.
Or you may want to start an air hub. If you are persuasive enough, you can even convince the government to compulsorily acquire the land and sell it to you cheap. Once you have cheap land, lucrative contracts and concession agreements, the sky’s the limit.
Let’s take it a step further. If you want to realise the value of all of these things that you have and still keep control of them, it’s nice to have a listed company into which you can inject them. Inject one asset for shares and you gain control of the company.
And then inject others over the years for cash, taking the money out of the company. Who says you can’t have your cake and eat it too?
Do it right and get a flow of assets to inject in (you can do anything with discounted cash flow valuations – just change the discount rate, and presto, the value changes!), and you get a tidy flow of profits and cash into your personal accounts over the years. I mean a really tidy flow.
Just how much can you make this way, you ask? Why don’t you take a guess first? Did you say RM500mil? Guess again. RM1bil? How about five times that and you may be getting into the right order of magnitude.
One Tan Sri Syed Mokhtar Albukhary actually made some RM4.5bil that way - actually more because he still controls the listed company. (MMC’s latest RM1.7bil deal irks investors7) We are not saying he is the only one, which makes your chances of joining the ranks better – if you are connected to high places that is.
But then again, if things change – and that’s still a big ‘if’ – you might not find it so easy anymore.
P. Gunasegaram is managing editor of The Star. He thinks it is high time we changed the way we did business
Saturday December 13, 2008
Even old men need to keep growing
Comment by Roshan Thiran
CALL it crazy, paranoia or kiasu but for Toyota employees it’s a crisis if they do not create improvement each day. The “kaizen mind” means there is only one way to move – forward. So everyday, whether you’re a line worker or management executive, you have to find ways to change what you’re doing so you do it better. In fact some years back, Hiroshi Okuda, the then chairman of Toyota Motor Corp proclaimed: “Failure to change is a vice.”
In less than two decades, Toyota has gone from a laughing stock in America to the world’s largest and most successful automobile manufacturer. It consistently outsells Ford and General Motors – thoroughbred American brands who are struggling to stem market share losses – and its Lexus was the top-selling luxury brand in America for six years consecutively.
It’s borderline obsession but given the results, I’m not about to knock it!
Kaizen is not a proprietary Toyota secret. Change, growth, improvement, innovation … these are just different monikers for essentially the same thing – keep changing the game and keep moving, improving and growing. Grow, grow, grow. Every successful company is dedicated to this pursuit of continuous growth and improvement, and the same can be said of great leaders and great people as well.
In my experience working and observing great leaders at GE and Johnson & Johnson in the US, Europe and more recently in Asia, one key trait of great leaders is their appetite for continuously learning and growing. Leaders never stop learning and growing because when that happens, they stop being leaders. Great leaders are always listening and watching in the hope of learning new ideas, new thoughts and discovering new truths and realities for themselves. Great leaders, regardless of their age, always have a hunger for learning and this drives their growth and that of their organisations.
The desire and ability to keep growing has always been the hallmark of leadership. I saw this firsthand from Jack Welch’s initial rejection of the Internet to his total embracement of it.
Now, Jack never was a great fan of the World Wide Web. He may have understood its strategic value and implications to the future but he never really showed it vis-a-vis his numerous initiatives and strategic directions. Of course, this was back in the early nineties when General Electric was very much a brick and mortar business dealing with physical estates like appliances, jet engines and plastics, and providing services like financing, credit cards and media.
Outside bits of NBC (the media arm) and GE Capital (its then financial services arm), GE at large showed no appetite for the Internet or leveraging it.
Then in the late 90s, Jack made a drastic about-turn and completely changed its web game and strategy. One day, he asks GE CIO Gary Reiner to provide someone from the group’s IT department to be sent over to teach him about the Internet. I think many of the IT folks in Fairfield Connecticut (GE’s HQ in the US) feared for their lives! What if Jack asked them an IT question that they could not answer. But someone volunteered and started teaching Jack about the Internet.
For a few weeks, Jack breathed and lived the Internet. When Jack learns, he really learns. He wasn’t interested to just shop online or dabble in virtual reality; he wanted to know the whole works. You have to remember that at the time, Jack was just a few years to retirement. It was in the late 90s and he was about to hand the reins of the company to a new guy named Jeff Immelt.
He had just transformed GE into the most admired company in the world and he himself was declared the most respected CEO in the world. Yet, he didn’t think he was above learning something new. He showed amazing appetite to learn about the Internet and within a few months could get away with talking like one of the tech guys!
When news made its way through the GE grapevine, most of us couldn’t understand why an “old” man would bother learning at this stage of his life. He had after all made it in life, so why bother? Jack could have easily retired on a high note and let the next guy figure out the Internet and its implications. But that’s the thing about great leaders – they never know when to stop learning. They never stop learning.
What precipitated this change of heart? Online shopping, apparently. The story, as the legend goes, was that Jack had gone home one day and found his then wife, Jane, on the computer. It was so uncharacteristic of her that Jack had to find out what she was doing. As it turns out, she was shopping. He could not believe that you could shop online and so she showed him how it worked by ordering a set of golf clubs for him (so the story goes!). That just blew him away.
Immediately Jack wanted to learn about the power of the Internet. And he then proceeded to set up new companies with the sole purpose of “destroying” their bricks and mortar equivalent by building new Internet-based businesses. In fact, he named them “DestroyYourBusiness.com”!
This was implemented across all GE business units like “DestroyYourBusiness.com_Plastics” and so on. The new CEOs of these dot-com entities were tasked with converting the sales functions of the traditional GE businesses from old methods to e-commerce.
More than five years on, GE’s aviation business, its biggest brick and mortar business, now sells almost all its spare parts and a number of other items online, thanks to DestroyYourBusiness.com Aviation. Not many people would have thought aircraft engine sales could be done online but it happened and they sell millions in a click! Functions like parts ordering to customer service and even dealings with vendors are done through GE’s IT infrastructure.
Jack’s desire to learn is insatiable. At a few years shy of retirement, he was still willing to shake things up and push the company towards new, untested waters. Is it any wonder that his name is almost synonymous with leadership? It all really begins with having a constant hunger to learn and be willing to learn from anyone … even from your spouse! Jack did. Yes, even old men need to keep growing.
> Roshan Thiran is the director of Global Talent Management for Johnson & Johnson. He also spent 12 years working with General Electric in the US, Europe and Asia helping develop leaders. He has a passion for helping people fulfill their potential and purpose and believes there is a science to developing leaders.
Saturday December 13, 2008
Leadership training for rural teens
By James Foo
It is rare that leadership development programmes are tailored specifically for the young. But a camp held in Port Dickson recently saw 80 youngsters between the ages of 14 and 18, many of whom came from rural areas or welfare homes, being given the opportunity to hone their leadership skills.
The “Driving It Out, Doing the Extreme!” (DIODE) Youth Leadership Camp was held from Dec 1-6 at the Eagle Ranch, Port Dickson.
The camp was conducted by Leadernomics, a company specialising in leadership development and talent management.
Developing leadership: Italian Technologies CEO Roberto Galeotti (left) giving feedback and advice to participants on their projects.
Malaysia Airlines and Astro All Asia Networks were among the corporations that supported this not-for-profit project by each sponsoring 10 children from various orphanages.
As the name of the camp suggests, participants, in teams of 10, were driven to partake in activities carefully designed to encourage the development of leadership traits through intensive, non-biased interaction among team members of differing races and backgrounds.
Teams were constantly pitted against each other to develop a healthy competitive spirit in activities such as the “DIODE Apprentice” and “Challenge Day”.
The DIODE Apprentice, modelled after Donald Trump’s The Apprentice series, and the “Challenge Day” were corporate-style programmes that were integral parts of the camp.
The programmes were aimed at exposing the children to the fundamentals of business and making presentations, besides giving them invaluable exposure to CEOs and business leaders.
Young, successful entrepreneurs such as Aidan Chew, winner of the first Nescafe Kick Start, were roped in to inspire entrepreneurship at these special programmes.
Other CEOs who were part of the CEO panel were Roberto Galeotti, a veteran former GE CEO, and Pete Foo, CEO of YellowBrick Road.
Not only were there learning and fun and games, there were also moments to reflect and learn from failure, another key theme of the camp. Each day, the “My Diary” segment, a one-hour period for the youths’ self reflection, was held at the conclusion of each day’s activities to reinforce the day’s lessons.
In the four days leading up to the “Challenge Day” segment, the teams were assigned projects to work on.
Developing leadership: Leaderonomics IT & Multimedia leader John Thomas teaching the youth how to use technology in their growth and development.
“These projects included designing a website, producing a DIODE newsletter, and putting together a proposal for youth development in schools and helping youths better themselves.
SuLin Lau, a business leader from renowned advertising agency BBDO, flew down from Singapore to be a part of the “Challenge Day” adjudication panel and was amazed at how well the youths presented their ideas and proposals.
The camp will be held four times a year beginning next year.
It aims to provide a platform for youths aged between 14 and 18 to increase their confidence levels and competence as leaders of the future.
Each camp will take place for six days and five nights, with full board, accommodation and course materials that include presentation handouts, stationery and other materials on leadership.
For queries on the next DIODE camp call Geraldine Sebastian at 012-289 6461 or e-mail geraldine.sebastian@leaderonomics.com
Friday December 12, 2008
Responsibility of doing business the right way
Everything that is done must be of high quality
WHAT is the business of business?
The answer to this question may seem obvious. We are told it is to maximise shareholder value. But what exactly does this apparently simple statement mean? Are companies supposed to maximise shareholder value at the expense of customers, employees and the community?
Are we talking about the short term or the long term, and what exactly do we mean by short and long term? Is it okay for companies to break the law, pay fines and get away with doing this again and again as long as the fines they pay are less than the profits they make by breaking the law? Are we talking about maximising profits or some cash-based measure instead?
As directors and senior managers think through the implications of these questions, it is clear that maximising shareholder value is not as straightforward an objective as might have seemed at first sight.
The famous Johnson & Johnson Credo, written in 1935 by General Robert Wood Johnson, puts satisfying customers first, respecting employees second, being a good citizen third and giving the shareholders a fair return last:
“We believe our first responsibility is to the doctors, nurses and patients, to mothers and fathers and all others who use our products and services. In meeting their needs, everything we do must be of high quality. We must constantly strive to reduce our costs in order to maintain reasonable prices. Customers’ orders must be serviced promptly and accurately. Our suppliers and distributors must have an opportunity to make a fair profit.
“We are responsible to our employees, the men and women who work with us throughout the world. Everyone must be considered as an individual. We must respect their dignity and recognise their merit. They must have a sense of security in their jobs. Compensation must be fair and adequate, and working conditions clean, orderly and safe. We must … help our employees fulfil their family responsibilities. Employees must feel free to make suggestions and complaints. There must be equal opportunity for employment, development and advancement for those qualified. We must provide competent management, and their actions must be just and ethical.
“We are responsible to the communities in which we live and work ... We must be good citizens – support good works and charities and bear our fair share of taxes. We must encourage civic improvements and better health and education. We must maintain in good order the property we are privileged to use, protecting the environment and natural resources.
“Our final responsibility is to our stockholders. Business must make a sound profit. We must experiment with new ideas. Research must be carried on, innovative programmes developed and mistakes paid for. New equipment must be purchased, new facilities provided and new products launched. Reserves must be created to provide for adverse times. When we operate according to these principles, the stockholders should realise a fair return.”
For a better answer to what is the business of business, look at why entrepreneurs start their companies. When asked, they do not talk about shareholders or maximising profits.
Instead they talk about the ideas they believe will change the world and how they want to make a difference.
Akio Morita, founder of Sony and father of the Walkman, wanted his engineers to make a product that would allow his daughter to listen to music as she walked to school. He wanted simply to make a difference to his daughter’s life.
Steve Jobs had a vision of a computer in every home when he and Steve Wosniak set up Apple.
Datuk Seri Tony Fernandes talked about the revolution in travel he wanted to bring to Malaysians who had never been in a plane when he founded AirAsia.
Henry Ford wrote this when he changed all of our lives by creating the mass produced motor car: “I will build a motor car for the great multitude … it will be so low in price that no man making a good salary will be unable to own one – and enjoy with his family the blessing of hours of pleasure in God’s great open spaces… and we will give a large number of men in employment at good wages.”
No mention of shareholders.
Peter Drucker makes the point even more clearly: “It is the customer who determines what a business is. For it is the customer, and he alone, who through being willing to pay for a good or a service, converts economic resources into wealth, things into goods…” (Drucker P, The Practice of Management, p35)
Yet we cannot say that all that matters is satisfying the customer. To do that would be at the expense of the other three key stakeholders: employees, community and shareholders. I will deal with them in turn in my next articles.
John Zinkin is CEO of Securities Industry Development Corp (SIDC). He believes that people should put the soul back into business.
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