COMPANY directors are not employees. They are in a fiduciary position and the payment for their services is provided for in the company constitution.
If they enter into contracts of service to occupy full-time salaried positions as executive directors, they become employees.
The shareholders of a company provide the capital and rely on the board of directors to make it successful.
The shareholders of FGV Holdings Bhd (FGV) exhibited shareholder activism by rejecting resolutions related to directors’ pay package, but re-elected all the directors. It is clear that the shareholders still have faith in the directors.
In January, FGV chairman Tan Sri Azhar Abdul Hamid wrote an open letter to shareholders highlighting problems faced by the company.
In the 2018 Annual Report, it was stated that directors’ remuneration was in accordance with the provisions under the Bursa Securities Listing Requirements and the Companies Act 2016. And FGV has in place a Board Remunerations Policy (BRP).
A shareholder said the package should be halved if they were serious about tightening budget.
The report also showed that return on shareholders’ funds was a negative 24.13 per cent and earnings per share was negative 29.6 per cent. The previous year’s RM130 million net profit turned into a net loss of RM1.08 billion in 2018, due to falling crude palm oil prices, and impairments and provisions totalling RM1.04 billion.
The directors — thinking the shareholders still have faith in them — proposed a 24.13 per cent increase in remuneration.
Why did the shareholders act that way?
Do they understand the market conditions and intricacies of the industry?
Do they understand the forces that regulate remuneration packages to attract and retain competent individuals?
Is it in accordance with the revised BRP? Or are they subtly telling the directors they are not good enough, five months later?
But then the board may not have done its homework to understand the pulse of the shareholders.
This should be a good lesson to others. It is difficult to get shareholders to bend backwards under current conditions.
SALEH MOHAMMED
Kuala Lumpur