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Petronas governance, oil and talent

Posted by admin

Monday, 29 June 2009 10:23

By Tengku Razaleigh Hamzah, The Malaysian Insider

JUNE 29 — There are reports of a supposed tussle of wills between the prime minister and the board of Petronas over his choice of a non-executive, independent director for the board. I find the way this discussion is being framed in the press and on the blogs a little puzzling.

To begin with, the question of a tussle of wills, so to speak, between the board of Petronas and the prime minister does not arise. The Articles of Association governing Petronas give the prime minister the absolute power to appoint and remove every single member of the board and management. The prime minister has the right to appoint or remove anyone, from the president and chief executive officer down to the company drivers. In particular, every member of the board is an appointee of the prime minister, and represents him on the board.

Therefore it is puzzling that appeals are being made for the prime minister not to interfere in the composition of the board of Petronas, when it is in fact his duty and sole prerogative to appoint members of the board who will help him in his function of overseeing the running of this wholly state-owned enterprise and seeing to the disposal of the wealth that it generates. Let us not suddenly forget the extent to which previous prime ministers directed the decisions of Petronas in service of their conceptions of the national interest.

Many discussions which raise the issue of corporate governance refer to Petronas as a GLC, and refer to governance practices proper to GLCs. But these GLCs have multiple shareholders and indeed publicly traded stock. Petronas is unlike any other GLC. It has only one shareholder: the state. Almost unique among national oil companies the world over, the entire oil and gas wealth of Malaysia is vested in Petronas. It has supervisory power over the major oil companies operating in our territory. It was not formed to privatise our oil and gas reserves but to safeguard our national sovereignty over them and to manage them more effectively as the common inheritance of all Malaysians. It is charged with ensuring our energy security.

Petronas’ sole owner is ultimately the Malaysian people. The person charged with stewardship of the people’s ownership is the prime minister, and he is accountable to the people through a democratic political process. Every member of the board is appointed by him to help him discharge this stewardship. In that situation if, as reported, any member of the board disagrees on principle with the prime minister’s decision to appoint someone, he should resign. This is the proper way for board members all appointed by a sole shareholder to express strong objection to an appointment.

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Comments (8) Add Comment

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written by krising1, June 29, 2009 10:34:11

I am a stake holder in this company and I do not know how my money is spent. Why are the details of the accounts, details of expenses escpecially, not being made public. We know how UMNOputras are using state funds as their personal accounts and only public scrutiny can stop that!

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written by cheemengwong, June 29, 2009 10:36:49

The PM can appoint anyone but....

If the PM appoints my mother whose has a BTC(Boh Tak Cha/no schooling) degree to run Petronas, should the Raayat agree?

She would divert all the Petronas money to me and I will join the ranks and likes of Bill Gates, Li KaShing, Locktor M and so forth.

Who would agree? Come on lah. We better think with our heads and not our hearts. One day Malaysia would sent another monkey to the moon when all others are sending men and women. it is this kind of mentality we should rid off now before it is too late.

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written by Jan, June 29, 2009 10:39:53

Let's say the PM appoints someone who in the opinion of the board to be a dungu, then they have every right to appeal to the good Prime Minister to reconsider his appointment. Isn't this what's happening now?

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written by carribeanking7, June 29, 2009 11:05:36

Tengku Razaleigh quoted :
The Petroleum Development Act that I had the privilege to help design did not envisage Petronas becoming a mega-corporation accountable only to privileged insiders. The real framework for understanding governance in Petronas is its accountability to the people of Malaysia through the prime minister of their elected government.

The problem partly lies with the Petroleum Development Actt 1974 , clause 6 and 7 give many sweeping powers to the prime minister
even to control dowstream activities.

Clause 6A has been "repealed" but dont know what the original contents are.

Suffice to say that many "akta akta" or acts give to much power to certain individuals whereas in other countries the acts have check and balance and a consultative approach.
Clause 5 of the petroleum act provides for a petroleum advisory council,
but the Prime Minister gets to pick whomsoever he likes, that's ridiculous !!
It would make sense if council member are made up of some independents who have no conflict of interests at stake.

In my opinion the Act especially Clause 5 on the petroleum advisory council,
must be amended to elect more independent council members to include opposition members who can summon Petronas balance sheets and make recommendations in parliament otherwise while bills of lesser impact require debate, important matters like these are left to the whims of one person.
After all this resource belongs to the people and the Petroleum Advisory Council should be made up of representatives of the people..

Vijay Kumar Murugavell

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written by nana tanjung, June 29, 2009 11:32:27

Vijay,

Don't get me wrong. I'm all for transparent Petronas. But to request Petronas to report to parliament as a wholesome has certain far-reaching impact.

Petronas has operations in more than 30 countries. To other countries besides Malaysia, petronas is not the custodian of their oil wealth and neither is regarded as an NOC. petronas is an IOC just like Exxon, Shell or BP in those countries.

As sovereign countries, it will not be in their interest to allow Petronas to report or be responsible to the parliament of another country, that is Malaysia.

So, any reporting to the parliament can only be done as far as Petronas' operation in Malaysia is concerned.

Now, the issue is a big chunk of their revenue and profits come from international operation. How do we account for that?

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written by sydput, June 29, 2009 11:38:10

Mahathir used Petronas fund to pump prime the economy. Now Malaysia is in debt to Petronas. Some of the pump priming excercise includes Dayabumi, KLCC, Putrajaya.

Funny things is, the oil money seldom benefit the community where the oil comes from. You name it. Malaysian east coast, Miri/Bintulu/ Labuan and KK coast etc. The money ends up in banks in KL, or some offshore banking centre.

That is why bankers in New York are paid handsomely. They are the beneficiaries of all the world's resources.

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written by bexe, June 29, 2009 18:33:14

KuLi
As the author of our Petroleum Act and as Chairman of Petronas, you have again showed us you are a failure. To design an autocratic system, obstensibly to protect the people's wealth is in itself an oxymoron. To see the failure of the scholarship program should horrify you, not make you proud, irrespective of the original objective. If I were you I wouldn't feel so proud, rather I would admit wrong & fight to make it better or go away in shame.

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written by Loh, June 29, 2009 20:44:54

Petronas was formed in 1974, and it was an institution created after independence where the prime minister had all the power. The idea of check and balance never entered the mind of the powers-that-be. Petronas is said to contribute to almost half of the Malaysian budget, and if such vast resources are vested in the hands of the PM without accountability, the PM is effectively an absolute emperor in terms of his authority on the utilization of the resources. In fact that was why some UMNO leaders could remain for decades; they were well supported with resources for money politics.

Petronas might not have required scholarship holders to be bonded initially. But those who entered into an agreement are expected to keep them. It is a character flaw for persons who jump bond; they can be arrested for jumping bail. It certainly sets bad examples if such person is accepted in the top management of Petronas.

If PM is all powerful, then the ex-PM who put himself in the payroll of Petronas will be there until death till they part. We are less concerned about the allowances paid, but more on the resources of its private fleet of aircraft being used for joy flights by the advisor and his extended families.

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