KDEB lavished on the Balkis

The vast sums alleged to have been donated to the Balkis in the name of corporate social responsibility (’CSR’) is worth taking a look at, if not just to determine the earning potential of a politically-linked charity, and also as a possible case study on what CSR is not.

By Daniel Chandranayagam (The CSR Digest)

Notwithstanding Malaysia’s leading regional CSR standing, a recent inquiry into Kumpulan Darul Ehsan Bhd (’KDEB’) contributions towards the now defunct Selangor assemblymen and MPs' wives' charity organisation (’Balkis’) reveals confusion on the term “CSR”. It also possibly exposes the interconnection between politics, business and charity in Malaysia. The vast sums alleged to have been donated to the Balkis in the name of corporate social responsibility (’CSR’) is worth taking a look at, if not just to determine the earning potential of a politically-linked charity, and also as a possible case study on what CSR is not.

An enquiry by the Selangor State Assembly’s Select Committee on Competance, Accountability and Transparency (Selcat) on the contributions disbursed to the Balkis revealed that KDEB paid for the flight tickets of seven members of the Balkis for a ’souvenier shopping’ trip to Guangzhou, China on May 2007. The cost of flight tickets for one business class and six economy class seats was RM17,438.

KDEB head, Datuk Abdul Karim Munisar, told this to the Selcat on the first day of its probe on 23rd March 2009. Abdul Karim was reported to have said that the company paid more than RM206,000 for the souvenirs bought in China. The entire cost was borne by KDEB under its Corporate Social Responsibility (CSR) programme.

Other expenses KDEB forked out under its CSR programme included RM65,300 worth of Songket material as gifts to VIPs at a function hosted by Balkis in February 2006, and about RM25,000 for souvenir chocolates.

On the second day of the inquiry, Permodalan Negri Selangor Berhad (PNSB) CEO, Datin Khairiyah Abu Hassan, was questioned by Selcat on the matter. Khairiyah was reported to have admitted that it was common practice for the state subsidiary to adhere to all ‘requests’ for funds from Balkis, which amounted to between almost RM500,000 to RM1.6 million, annually.

Khairiyah, who was deputy CEO in 2002, disclosed that it was ‘usual practice’ for Balkis officials to make verbal requests for project funds, and it was not unusual for the payments to be made in cash. She was also reported to have admitted that PNSB made payments on behalf of Balkis without really knowing who the recipients were.

The revelation made on the morning session on 23rd March 2009 by state secretary, Datuk Ramli Mahmud, that the CSR guidelines for state companies are determined by the companies themselves, and that there was no fixed guidelines, perhaps reveals the need for greater understanding on CSR and the Silver Book.

KDEB is either a government-linked company (GLC), or a government-linked investment company. If it is a GLC, it is subject to the Silver Book. If it is a GLIC, then the Silver Book, a guideline determined by the Putra Jaya Committee on GLC High Performance (PCG), surely would have been of persuasive value to the company. The Silver Book has been in existence since 2005. Under the three leading principles of the Silver Book:

Principle 1: The GLCs’ primary objective should be to enhance shareholder returns and meet the needs of other stakeholders (e.g. consumers and employees)

Principle 2: GLCs should proactively contribute to society in ways that create value for their shareholders and other key stakeholders

GLCs should aspire to lead corporate Malaysia as socially responsible corporate citizens

Principle 3: GLCs should actively manage their contributions to society in the most efficient and effective manner in line with the industry norms and best practices as well as the relevant regulatory framework

This is just the beginning of the Silver Book. The guidelines go on to outline what GLCs should do to create an effective Contributions Programme. From this list, it is hard to tell what KDEB was striving for in their contributions towards Balkis. According to news reports, Karim Munisar said, “We do not question the relevance of this [the contributions to Balkis] as it was determined by the previous state government, and there are no criteria or guidelines. Now KDEB is under a new government and if they change the policy and stipulate guidelines pertaining to CSR programmes, then we will adhere to it.”

He also was reported to have said that if the president approves the appeal for funding from organisations like Balkis then the board would have to endorse it.

This begs the question as to who really runs government-linked companies. CSR as practised by a government-linked company surely would have a more onerous duty to its stakeholders and the public than a usual private company.

The KDEB versus Balkis case has also highlighted the lack of transparency practised by charities and NGOs in Malaysia. Balkis, which is said to have received millions of ringgit from state subsidiaries, was reported to have failed to submit audited accounts to the Registrar of Societies (ROS) since 2001. The State ROS deputy registrar, Yunos Jamil, was reported to have said that the discrepancy was an “oversight.”

If corporate citizens are meant to give sincerely, it perhaps would be expeditious if the recipients practised greater transparency. It does not help that the laws on NGOs, charities and social organizations are not uniform. Currently, these organizations are subject to the laws relating to the form in which they exist. They may choose to exist as companies (either limited by shares or guarantees), societies, or sometimes they even exist as non-registered entities (which means they are subject to no laws). It is time that these regulations are streamlined.

The KDEB versus Balkis scenario, if all the allegations are true, is a worst case scenario and reveals the pitfalls of CSR in Malaysia. More needs to be done to create greater awareness of CSR (and the Silver Book), while greater transparency of the giver and recipient needs to be determined by law.

Otherwise, while CSR flounders, so can the potential for corruption.