Committee finds PKA board negligent

By Sharon Tan, The Edge

PUTRAJAYA: A committee set up by the Port Klang Authority (PKA) to probe the administrative and governance practices adopted by the authority that led to its undertaking of the controversial Port Klang Free Zone (PKFZ) project found the board negligent in discharging its duties

In view of the findings that were revealed by Datuk Paul Low, the chairman of the Ad Hoc Committee on Administration and Corporate Governance, PKA is looking into initiating a legal suit against those who served on its board between 2001 and 2007. This will be deliberated at PKA’s board meeting next week.

Announcing the findings, Low who is also president of Transparency International-Malaysia, cited numerous violations of corporate governance practices.

“We believed that the past board was grossly negligent in not discharging their fiduciary duties. In any organisation the CEO or the GM is also under the authority of the board. A board cannot deny that it is ignorant or it has no power. The buck stops at the board. The board should have known and stopped all the abuses. I am sure they knew because the auditor-general’s report was made available to them,” he said.

“Also, because of the GM being the CEO, probably felt that being appointed by the Minister (of Transport)… need not report to the board also. So she bypasses the board.

“So you have a CEO who bypasses the board and you have a board which didn’t bother to rein in all the abuses,” he said, adding that this is a lesson to all as people who are appointed to the board have a responsibility and a duty, especially in a public institution or corporate organisation.

On whether PKA has legal recourse in the matter of its previous board members having failed to carry out their duties, Low said it was up to the current board to deliberate and resolve whether any action could be taken.

PKA chairman Datuk Lee Hwa Beng, who was also present at the press conference, said he would seek advice from the authority’s legal representatives. PKA has appointed Skrine and Co as its lawyers in matters pertaining to the PKFZ fiasco.

“We will definitely discuss it at the next board meeting but at this stage we are more concerned about recovery of  money. Who can we recover (it) from so that we can reduce our debts of RM4.6 billion?” Lee said.

Asked if a member of the public could initiate a class-action suit against the PKA board members, Low said: “This is something that the public will have to ask themselves. We cannot answer that.”

A total of 28 people were on PKA’s board between 2001 and 2007. Those who were on the board for the entire six terms were its former general manager Datin Paduka OC Phang and a representative from the Port Klang Workers’ Union, Ahmat Abu.

Westport executive chairman Tan Sri G Ghanalingam served five terms while Datuk Abdul Rahim Mokti, who represented the Treasury, served more than three terms. Zubir Abdul Aziz representing the Economic Planning Unit and Datuk Dr Abdul Munip Kasmin representing the Selangor state secretary also served more than three terms.

Former Serdang MP Datuk Yap Pian Hon and Datuk Ahmad Bhari Abdul Rahman served three terms. Former minister Tan Sri Dr Ting Chew Peh and Sementa (Selangor) assemblyman Datuk Abdul Rahman Palil served more than two terms.

Low said a board must exercise fiduciary duty to make sure the interests of the stakeholders are looked after.

“The board members are not there just to be inactive, to be passive but actually have a responsibility, in this case both to the government and the public,” said Low.

He also pointed out that one of the biggest issues the committee found was that PKA was not equipped to handle a commercial project.

“PKA was established as a regulatory authority by the government to regulate the port activities but PKFZ is a commercial enterprise. Here you can see an authority going into business. One of the faults is the structure of PKA is not made to go into business. There must be a separation of powers between the PKA and PKFZ. The regulator cannot be both the regulator and running the business enterprise,” he said, adding that the general manager and the boards for the two entities must be different.

Low also said the PKFZ case involved huge losses and the implication was great.

The committee, which also consisted of former Malaysian Institute of Accountants president Nik Mohd Hasyudeen Yusoff, Malaysian Institute of Corporate Governance secretary-general Paul Chan and National Audit Department deputy director (representing the Auditor-General) Saadatul Nafisah Bashir Ahmad, also found that it is bad practice when the minister appoints the general manager without the approval of the board.

When the minister appoints the general manager, it would give rise to the general manager thinking that he or she is only answerable to the minister, Low said.

“The GM or CEO must be answerable to the board, otherwise the GM will be very powerful,” said Low, who also found that the internal audit committee must not be chaired by the CEO or GM as there is a conflict of interest.
Lee also said the board would look at implementing the recommendations: They include:

· Restructuring the PKA and PKFZ boards whereby one-third of the members will comprise independent non-executive directors who are not from government agencies and not political appointees.
· the term of the chairman should be for a minimum of three years and that of board members, two years. At the moment it is for one year;

· Strengthening the role of the internal audit department whereby it reports to the board and not the general manager. Previously, the general manager chaired the audit committee;

· Strengthening the role of the tender committee by having it  chaired by an independent director. The general manager should not chair this committee;

· Adopt a whistle-blowing policy that encourages disclosure by employees, vendors and other parties who have relationship with PKA;

The report is available in its entirety at