Corporate bosses live it up, shareholders suffer
I have been following with great interest the ongoing debate on the remuneration packages of those leading the GLCs.
The justification for the high remuneration and perks is that the companies need the best talent to manage the multi-billion ringgit organisations.
Some of the questions that come to my mind include the following:
[a] How is the 'best' talent evaluated and gauged and against what? This is due to the observation that some of the individuals may be young and without expertise relevant to the core activities of the company to which they are appointed.
It is noted that in most cases these top honchos may be from the financial/accounting qualifications and experience which may have little relevance to the core activities.
(As an example the chairperson of one of the GLCs explained that the advice of professionals was sought before decisions were made but when the head honcho does not have relevant expertise how could he gauge that the professional advice was the best and thus it could be assumed that he would be having blind trust in the professionals.
This company suffered major losses when it acquired a financial institution some decades ago and again lost couple of billions of ringgit when it invested in another company whose core activity had nothing in common with its existing core activities in which it was experienced.
The best part is that the audit committee and its internal audit department may also have been having blind trust in the professional advice and also the external auditor gave 'clean' certificates for conducting the audit for which it collected over a million as fees for its opinion.)
[b] In addition the Bursa head was given 250,000 shares grant of which the current market value is about RM1.7million. Can the LHDN clarify whether this benefit is tax exempt capital gain or will be classified as income subject to income tax?
It may be noted that profit derived from low price shares issued to some directors and all the senior management and other staff are generally disposed off, at high market rates resulting in profits that can amount to millions of ringgit for directors/senior managers which may be classified as capital gain and thus tax exempt. Should this not be classified as 'income' and taxed if not being done?
[c] ESOS and other perks are just some of the means where 'income' is given but may not be subjected to full income tax as the ringgit value of these perks may be valued at low rates for tax computation purposes.
Some examples of such perks include free accommodation/vehicles/overseas holidays/etc.
This also applies to politicians in government and civil servants including those in authorities/agencies.
The owners of companies are the shareholders whereas the stakeholders of the country's resources are the rakyat.
Unfortunately the major beneficiaries of the corporate sector are the directors and management and those of the country's resources are the politicians in power and the civil servants with little benefit to the shareholders who own the company and the rakyat but the shareholders and the rakyat are the first to suffer in case of losses or the company goes into liquidation.
Cyprus has explained this in a very clear manner as the shareholders and the rakyat are the biggest victims of the mismanagement of the corporate sectors and the government's failed economies and those in the ruling category remain largely unaffected.