Will PNB Place a Monkey on Sime Darby's Back?

The Malay equivalent is wanting Sime Darby to Pikul biawak hidup. No, this isn't name calling or a nasty attempt to defame another person - just using the common terms as they already exist for a clearer understanding of the situation here.

Here's the situation: Datuk E. Sreesanthan, a prominent corporate lawyer and also a director of public-listed Sime Darby Berhad, has put himself up to be re-elected at the conglomerate's annual general meeting (AGM) on 8 November 2012.

So what's the problem? Well, Sreesanthan is currently facing SEVEN charges of insider trading involving Sime Darby, UEM, VADS and Maxis shares. Now these aren't exactly trivial charges: upon conviction, he faces a minimum fine of RM1 million and up to 10 years in prison for each offence under the Securities Industry Act 1983 and Capital Markets and Services Act 2007. So why should he be seeking re-election until the cases are resolved? And why should Sime's major shareholders want him to remain on the board?

After he was charged last July, Sreesanthan took a leave of absence from the board. He also indicated that he would only serve out the remaining tenure and not seek reelection. That would have been the best for everyone, including for Sime. Unfortunately, Sreesanthan has changed his mind and is insisting on the "Innocent until proven guilty" tenet as one often hears about and had seen numerous times on TV.

Why is he so keen to hold onto the director's post, regardless of what others - espec! ially investors - feel? I don't know, but if it were me, the RM478,000 in fees received in the last financial year from Sime would be an attraction (See page 62 in Sime's annual report which can be downloaded here). That's not as much as the RM5.2 million which executive director Dato' Mohd Bakke Salleh received as remuneration. Or chairman Tun Musa Hitam's fees of RM822,000. BUT that would be more than enough for me to buy a new Mercedes-Benz E200. Or a decent two-storey terraced house at Bandar Saujana Putra. Or whatever else that that one can do with almost RM500k...

Okay, RM478k might not be that much for people like him. But whatever his other reasons are, by seeking re-election, it looks like he isn't taking into consideration what Sime's interests are. This is one GLC that has come under fire for various reasons - many justified - over the past few years and Sreesanthan's continued presence will not serve any good purpose for the company's image. While other blue chips and so-called quality counters listed on Bursa Malaysia have been doing well by adding value for investors, Sime is a laggard. Now that's not fair to shareholders, and all of us are by virtue of it being a GLC.

Sreesanthan was put there by PNB - now the latter will have to do the right thing and tell Sreesanthan not to overstay his welcome. If he's re-elected, then it means those at PNB don't give two hoots about the "corporate governance" that is being bandied about.

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