A government linked company (GLC) paid its director more than half a million ringgit in wages last year although it recorded RM71.2 million in losses.

This does not make sense but Sime Engineering Services paid its top executive, Md Ja'afar Abdul Carrim, a sum of RM550,000.

On the public listed side, Rashid Hussain Berhad paid its executive chairperson, Sulaiman Abdul Rahman Taib, RM13.5 million in 2004 although the company recorded a loss of RM21.5 million. This does not make sense too but it happened.

Commenting on such 'senseless' pay-outs ( see chart below ), DAP secretary-general Lim Guan Eng said that it has brought to attention the need for the government to restructure pay schemes for its GLC top guns and that public-listed firms should follow suit.

"For too long, the lack of a results-driven approach has hampered the maximization of profits. Top managers should be on a basic salary to a performance bar where they will not be given any allowance and incentives or even (be) sacked if they fail to achieve a certain level of profits.

"Malaysians will not be impressed that company directors of GLCs get fat salaries when the companies are losing money," Lim told a press conference today as he highlighted a recent financial report on wages earned by directors of GLCs and listed companies.

He added that the government should ensure that even if a company does not end its financial year in the red, it must justify its pay-outs.

"It should be based on a minimal percentage of rate of return on capital employed and not just based on profit," he said.

He had based his arguments on a recent report found in the Malaysian Business magazine which listed earnings of directors of various local corporations and GLCs.

What further irked the DAP was the obvious disparity between a company's earnings - especially GLCs - and its top management pay-out.

Disparities

"GLCs contribute RM260 billion, or 36 percent of Malaysia's market capitalisation, and employ five percent of its workforce. It is sending a wrong message to private companies when rewarding executives who do not perform," Lim stressed.

"They should get a basic salary and, above and beyond that, be paid according to earnings based on the rate of return on capital.

"Malaysians will not be impressed that, in 2004, Tenaga Nasional Berhad directors were paid RM1.6 million despite recording the lowest return on capital, employed among power companies in the region, of 5.2 percent," he added.

The report also showed that national carrier Malaysia Airlines ex-boss Ahmad Fuaad Mohd Dahalan, who recently resigned, was paid almost RM900,000 while its directors received RM1.5 million last year. The airline recently recorded RM281 million losses in its first quarter of 2005.

Meanwhile, Telekom Malaysia recorded the highest net profit in 2004 of RM2.6 billion. It paid its top executive close to RM800,000 and RM2.7 million (10 percent of profit) in total to its directors.