In order to run government-linked companies (GLCs) professionally, their senior manager salaries should not be set above or below market rates, instead they should be competitive in line with the challenges and responsibilities tasked in managing businesses of similar importance and size.
Assistant professor of management at Asia School of Business Renato Lima de Oliveira said Malaysia has world-class companies that require top talents and the GLCs would have to offer competitive salaries in order to recruit and retain them.
"If you don’t offer competitive salaries, you might end up without the right mix of people running top companies: you will get those who could not get a job elsewhere because they are not top talents or those who are driven by a political agenda, which may conflict with good management," he told Bernama in an email interview recently.
De Oliveira noted that the salaries would vary from company to company but such principle could guide a review of the top management of GLCs to make sure the companies were able to attract top talents with remuneration in line with equivalent positions in the private sector and give managers independence from political pressure.
He was asked to comment on Prime Minister Dr Mahathir Mohamad's warning that the days of top executives at the country's GLCs drawing fat salaries regardless of their companies' performance were over.
The premier had said that in the past, the government found it convenient to place its supporters in GLCs where these executives got a good income, and this resulted the businesses had a lot of people who were non-professionals and unfamiliar with business, thus defeating the whole purpose.
Citing an example, de Oliveira (photo) said aspiring politicians might be willing to run companies with below market salaries for a comparable position in the private sector in order to get public exposure and build connections, but investment decisions for political gains could come into conflict with what was best for the sustainability of the companies.
"In economics we call this adverse selection. This should be avoided as it can also open the door to corruption, which the government wants to avoid," he pointed out, adding that state companies had historically served, in many developing economies, as tools to build political support, just like Cabinet ministers.
De Oliveira, who is also a Research Affiliate at the Massachusetts Institute of Technology, also noted that it was important to shield the GLCs from political pressures and from the turnover in government and cabinet positions, while stressing that the importance of transparency.
"If GLCs are more open about its activities, expenditures, and contracts, it discourages mismanagement and corruption. But disclosure of information alone is not enough: freedom of the press is critical for investigative journalism.
"These are reforms that the Pakatan Harapan (government) also championed and, if implemented, will help strengthen the accountability of Malaysian companies and politics in general," he pointed out.
De Oliveira added that the opposition parties could also play a balancing role by monitoring data, performance, and contracts.