Petronas governance, oil and talent

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.