Saturday, June 19, 2010

This Is Forced Charity, Not Kosher

Charity ... for it to be meaningful and fair, do it from your own pockets.

KUALA LUMPUR: Tradewinds Plantation Bhd’s (TPB) AGM today could be an interesting affair as the Minority Shareholder Watchdog Group (MSWG) has sent to the company a set of questions ranging from crude oil pricing to a donation of RM10 million made to the Albukhary International University, sources said.

Of particular interest to minority shareholders will be the RM10 million donation, which is deemed as excessive, representing about 20% of the company’s net profit. MSWG’s list of questions also include seeking clarity on its plans to build palm oil mills.

TPB’s 69.76% parent Tradewinds (M) Bhd is also understood to have received a letter from MSWG over its own contribution of RM10 million as well, to the same university. Tradewinds’ AGM is slated for June 22.

The RM10 million contribution by Tradewinds works out to about 12% of its net profit for FY09. Issues have cropped up as Tan Sri Syed Mokhtar Albukhary controls almost 43% of Tradewinds and has an interest in the university as well.

The RM350 million Albukhary International University in Alor Setar, Kedah comes under the control of the Yayasan Albukhary, which in turn is controlled by Syed Mokhtar.

This will not be the first fiery AGM in the businessman’s stable of companies.

The Edge Financial Daily learnt that Syed Mokhtar’s flagship MMC Corporation Bhd’s AGM at end-April was also a fiery one, with shareholders questioning a RM75 million contribution to the university.

For FY09, MMC posted a net profit of RM236.71 million on RM8.44 billion in revenue, which means the contribution to the Albukhary International University amounted to over 30% of the net profit. Syed Mokhtar, via his vehicle Seaport Terminal (Johore) Sdn Bhd, controls about 42.47% of MMC.

Even more interesting was a contribution by water player Aliran Ihsan Resources Bhd, which gave away some RM20 million to the university. Aliran Ihsan’s net profit for FY09 amounted to RM30.23 million, meaning that the company forked out almost two-thirds of its net profits to the university.

Syed Mokhtar’s MMC has more than 70% equity interest in Aliran Ihsan.

Another company the tycoon controls, Padiberas Nasional Bhd (Bernas), has forked out RM20 million to the Albukhary International University. Bernas is 72.57% owned by Tradewinds.

In total companies linked to the tycoon is understood to have donated anywhere between RM135 million and RM150 million to the university. Another Syed Mokhtar-controlled company, DRB Hicom Bhd, has not done so.

According to MSWG’s letter to TPB, such donations are normally in the 2% or 3% range of net profits and that “the (TPB) board should provide more clarification on the substantial contribution”.

“Giving out to charity or such causes is fine; just ensure the company pays out dividends and then pay it from your own pocket,” an industry observer said.

This article appeared in The Edge Financial Daily, June 17, 2010.

Since when did the objectives of a listed firm include a significant amount to be donated as charity? If its a 100% owned company, nobody would bat an eyelid. If its minor, 1%-2% of profits, that can be classified as being a good corporate citizen. When it starts hitting double digits percentage of profits, we have to ask why that is necessary? More importantly, the management and board should be brought to task by SC and Bursa because we need transparency as to why the donation was made, and why that kind of substantial sum.

Its not a 100% owned company, which means there are minority shareholders. That is forcing the minority shareholders to donate alongside their hard earned investments. Its a listed vehicle, minority shareholders' rights must be protected. Unless you make it part and parcel of your "articles of association" and stated financial objectives and disbursements ahead of time, that is not kosher. Investors invest in a company for its assets and entrusts management to bring in the returns, not fritter it anyway they choose.

When the charity is also "linked" to the controlling shareholder, too many alarm bells are ringing. SC and Bursa MUST put their foot down. Its making a mockery of good corporate governance and trampling over minority shareholders' rights.

Charity is all good but thats not the main objective of minority shareholders. This is very disturbing. Its supposed to be a listed firm, not a NGO.


kl said...

Doing it all from your own pocket is too 'Buffettish' for ALbukhary. Why pay for it all yourself when you can get others to foot part of the donation, but you get all of the kudos to your private account.

It's one technique of stretching your RM, a very Malaysian habit these days. Politicians do it with public funds, businessmen do it with shareholders funds ; even the guy on the street does it except the poor guy has to do it with his own funds to make ends meet.

TK said...

Agreed, donate it from your own pockets. This is to only way to avoid conflict of interest, maintain good corporate governance while keeping a good name for himself.

soon said...

Blame it to the rising cost. It is expensive to build a university nowadays. It may cost RM800m (or more, depends on the 'contractors') ;)