One exec, one role

THE discussion around board appointments often focuses on independent non-executive directors (INED) and the critical role of the nominating committee (NC) in ensuring the right fit.

Additionally, directors of publicly listed companies must comply with Bursa Malaysia Listing requirements, which cap directorship at five companies, regardless of whether the roles are executive or non-executive.

The NC’s responsibilities extend beyond INEDs, encompassing the identification and recommendation of new board and committee nominees, succession planning for executive directors (ED), managing directors (MD), and C-suite positions, as well as reviewing the board’s mix of skills, experience and core competencies.

With e-invoicing, the role of INED in providing expert opinion, guidance, and oversight under a contract for service is clearer.

INEDs are not employees under the Employment Act, 1955, unlike EDs or MDs, whose services fall under a contract of service and are considered employment income.

The INED can provide multiple service contracts to organisations, as it is considered a service contract.

However, for an ED, executive chairman (EC), or MD, the question arises whether they can hold multiple full-time roles with various listed companies and how this aligns with their NC responsibilities.

Time commitment is another concern, as multiple salaries suggest they may be serving another company while being paid for full-time roles.

This differs from a blue- or white-collar worker moonlighting to make ends meet, where the second or third job is done outside office hours.

Many hats

The most recent example of an executive role appointment was the naming of an individual as non-independent non-executive chairman (NINEC) of MMAG Holdings Bhd.

Prior to this, he was also appointed as NINEC for both Key Alliance Group Bhd and 7-Eleven Malaysia Holdings Bhd.

Additionally, he serves as the EC for Apex Equity Holdings and Excel Force MSC Bhd.

This means the director holds three non-executive roles and two executive roles.

This is not an isolated case, as it is common to see executives holding multiple positions, including non-executive roles, in other companies.

This trend is particularly prevalent among family-owned conglomerates.

In the case of YTL Corp Bhd, the EC of the company also serves as the EC for three other Bursa-listed companies: YTL Power International, Pintar Projek Sdn Bhd (manager of YTL Hospitality REIT), and Malayan Cement Bhd.

It’s also common to see family members holding multiple executive roles across these YTL-related companies listed on Bursa Malaysia.

This practice is not unique to YTL.

In other family-owned businesses, it’s quite common to see individuals holding multiple executive roles across listed companies within the same family business group.

This trend is evident in companies like Genting, the Chin Hin Group, and both IOI Corp Bhd and IOI Properties Group Bhd.

It’s interesting to note that some board members hold executive positions in one company while serving as INEDs in another.

For example, the chief executive officer (CEO) and non-independent, non-executive director of MR DIY Group (M) Bhd was appointed as an INED of Maxis Bhd in August 2023.

Similarly, someone recently became the MD of Symphony Life Bhd while also holding the MD role at XOX Bhd.

Overstretched

In family-owned businesses, like YTL Corp, Genting, or IOI Group, it’s common for the same person to lead executive roles.

This approach ensures familiarity with operations and aligns the group’s strategic direction.

However, it can also lead to conflicts of interest, especially in related party transactions, where executives may need to abstain from voting.

The idea of serving on another board should be carefully evaluated, as it may take time away from the primary company or board where the individual serves in an executive role.

When an executive assumes an INED position, these two responsibilities are incompatible, and an INED role cannot be fulfilled without taking a leave of absence from the executive position.

Greater NC scrutiny

Professional expertise, performance ability, time commitment, and meeting board expectations are crucial when selecting a director especially for executive roles.

Executives on one board should not take on another executive role or serve as an INED if they cannot commit to the required time or have previously failed to meet company goals.

Executive roles are full-time, so any external work must be vetted by the NC to ensure the appointee understands the challenges and expectations.

CEOs should not serve as INEDs in other companies unless they are part of the same group.

This current practice should be discontinued.

Limiting executive roles

As mentioned earlier, the Bursa Malaysia Listing Requirement allows a board member to have five directorships, but it does not define whether these are executive or non-executive roles or a combination of the two.

Considering the challenges of managing multiple roles, especially when executive positions are outside the main group structure, it’s time to focus on having executives hold just one role in a Bursa Malaysia-listed company.