Reform GLC Appointments, Introduce GLC Act

The Coalition for Clean and Fair Elections (BERSIH 2.0) calls for a new law to introduce thorough reforms to the appointment process of chairperson and director of government linked investment corporations (GLICs), government linked corporations (GLCs) and all commercially related statutory bodies.

A new GLC Act should be legislated to define GLCs clearly and to regulate the appointment process of their chairman/president and directors in compliance with transparency, accountability and meritocracy. The parliamentary select committees should be given power to scrutinize the appointment process as a check and balance mechanism.

Such reform is much needed as the power is currently highly concentrated in the hands of the Executive, especially the Prime Minister. It has been abused during Barisan Nasional (BN) and Pakatan Harapan (PH)’s rule for political patronage and control of resources at the expense of merit, competency and professionalism.

The unchecked abuse of such power became worse during Perikatan Nasional (PN) government when positions in GILCs, GLCs and commercially related statutory bodies were used to entice elected representative to cross party and to support the government in its attempts to hold on to power.

Partner of BERSIH 2.0 in this research is Institute for Democracy and Economic Affairs (IDEAS). Its CEO, Tricia Yeoh, comments that although a case can be made that the Executive appoints his trusted persons to have oversight, especially in state owned enterprises (SOEs) carrying out important public policy objectives, the appointment of politicians into these SOEs should be avoided to minimise conflict of interest. She says the parliamentary select committee should vet the appointments to ensure it is made based on qualifications and not for personal or political gain.

BERSIH 2.0 launches a report entitled “Reforming the Appointment Process of Directors in GLICs, GLCs and Commercially Related Statutory Bodies” today. The report, written by Ahmad Fikri Fisal and commissioned by BERSIH 2.0, identifies several key problems:

1. The expansion of the payroll vote when elected representatives such as members of parliament (MP) or state assembly persons (ADUNs) are appointed as a director in a GLIC, GLC or statutory body which is within their legislature’s supervision. The Executive’s control over the Legislature is strengthened, which hampers the latter’s function in preserving the integrity of the separate branches of power and hold the Executive accountable.

2. GLIC’s incorporation statutes and parliamentary laws governing GLCs do not spell out stringent requirements on persons to be appointed as directors and there is no legal or institutional instrument to ensure that the appointments made by the Minister have appropriate qualifications.

3. There are no guidelines for the appointment of directors at the statutory (GLIC) level. The Green Book on Enhancing Board Effectiveness applies only to major GLCs. Guidelines by regulatory agencies such as Securities Commission Malaysia and Bursa Malaysia Berhad are only applicable to some GLCs that are public-listed. And there are no identified guidelines related to state-level GLCs’ appointment process. This lack of a clear framework makes regulating the appointments and making reforms difficult.

4. The Executive has complete authority over the appointment of the directors, especially the Prime Minister. Even appointment of directors in non-GLIC statutory bodies such as FELDA, MARA and Petronas are also dominated by the Executive.

5. The convoluted GLC ownership structure & the official definition of GLCs comprises only the commercial ones and those owned by GLICs. This excludes companies owned by the other statutory bodies such as PETRONAS, FELDA, MARA etc. It also excludes government-owned companies that are not commercially oriented.

BERSIH 2.0 urgently calls for the following reforms:

1. Prohibit the appointment of elected representatives in these organisations through a new GLC Act, or by amendment of existing relevant laws such as the Companies Act.

2. Empower Parliamentary Select Committees to scrutinise and approve director nominees of GLICs/GLCs/Commercially related statutory bodies under the respective ministries. This system can also be emulated by state governments for state GLICs/GLCs/Commercially related statutory bodies.

3. A clear definition of GLCs/GLICs that is applicable at both the state and federal level should be laid out in a new GLC Act or in an existing act like the Companies Act. This will form the basis to institutionalise reforms relating to the process and requirements of GLC director appointments.

4. Enhanced disclosure and transparency is mandatory through periodic reports on listed/unlisted GLICs/GLCs that should include important information such as director remuneration, director background, tender bids etc. A specific body such as the Putrajaya Committee on GLC High Performance should take on this task.

Released by,
The Steering Committee of BERSIH 2.0