When Independent Director-cum-Auditor Talks Cock...

Regular readers of this blog (yes, there are actually people that read this blog although not many) would know that I am accounting-trained. Regular readers of this blog would also know that I have very little respect for auditors and accountants. Auditors, as a profession, seems to get away with most flak. When a company collapses, it is always the management fault. It is also the fault of the investment bankers, the analysts, the fund managers and the regular retail investors. But, as usual, no criticism was leveled on the auditors, the one that supposed to ensure the company viability as a going-concern. Auditors, as a profession, is filled with people of questionable intelligence, but try to make themselves look smart with all sort of jargons. Auditors, as a profession, also teaches future auditors that they are not responsible for any sort of crap that happened. Auditors, as a profession, thinks that shareholder lawsuits against them is bad for the industry, that they are god-like and should never be sued. Auditors, over the years, have perfected the art of responsibility avoidance.

So, when one Independent Non-Executive Directors (INED) and Chartered Accountant of Golden Plus Bhd ("Gplus" hereafter) writes to the Star to defend himself and his peers, it is filled with the "responsibility avoidance" tone that plague the industry. Read his full letter here : Harsh fines for non-executive indepenent directors. According to the annual reports of Gplus, the author apparently is a corporate governance expert. But, the things he says make non-corporate governance expert like me shudder. The author is also a fraud expert. The author also did some stint with KPMG UK, Singapore and Malaysia.

So, here is what he says:

To subject these directors to such hefty fines and penalties seem rather harsh, more so when they are not in any position to control events, which are mainly the domain of the executives. The members of the audit committee and in particular, the audit committee chairman, are there by reason of a Bursa Malaysia listing requirement. At least one of them must be a member of the Malaysian Institute of Accountants (MIA).

Oh, you mean you are there just to help some strangers fulfilled its Bursa Malaysia listing requirements? You really very good people lo... Or...Did you do it for the business contacts, for the business favors in return for future businesses?

They are only able to play a role of advising at directors’ meetings and/or not approving questionable acts and transactions, but are never in a position to dictate when an act is to be accomplished by the company, for example, the issuance of quarterly financial statements, annual audited financial statements and the like.

Hmm..did you know that you can actually resign? Plus, for all the director's experience and expertise in corporate governance, he seems to not understand our companies act and basic company law. Basically, executives are answerable to the board of directors and the board of directors, in turn, are answerable to the shareholders. So, our corporate governance "expert", is ranked higher than the management. During the time the offences is committed by Gplus, there are more INEDs than executive directors in the board. If the INEDs actually do their job properly, they can threatened to sack the management for failure to publish the account. For all his auditing experience and expertise, he seems to "forget" to do so. In addition, aren't making sure that quarterly financial statement publish on time is part of your role, as in, as a director, you should be receiving regular updates from the company. When there seems to be no updates, don't you think that you should be concern and asked the company for their apparent lack of update? You mean your job is just to attend meetings and talk cock during the meeting as well as share tips of which golf course is good?

To penalise the non-executives seem rather unfair especially if one looks at GPlus’s non-executive directors – a former senior judge, a former senior civil servant, a former Chief Police Officer and two practising accountants. In view of the enforcement actions taken by Bursa Malaysia on the GPlus directors, both accountants have had their audit licences restricted.

There appears to be no direct correlation between the ability of the relevant individuals to perform audit work for their clients and being a representative on a board, but nevertheless this is the actual sad state of affairs.

Oh, his licence get restricted, that's why he is so piss off. But, I want to ask a question. If you do not have the ability to do the job properly, why do you take it up in the first place. If directors can't be penalize, how can we ensure that they will do their job properly. Imagine murder is not punished by life sentence or death penalty, everyone will go around killing people.

I wonder what would happen if all practising members of the MIA refuse to accept any appointment as a “watchdog” for the miserly director’s fees paid. In any case, most of these practitioners don’t really need the money but do take up such board positions for a variety of reasons, including social responsibility.

First of all, if all MIA members is of the quality of the author, as a minority shareholder, I welcome and thank their decision to not accept any watchdog role. What good is a watchdog if he can't watch and bark at anything suspicious? Then, the question of miserly director's fees. According to Gplus annual report, in 2008 (the most recent figure) RM104k is paid to five INEDs, so, it is on average RM20+K per person. In 2007, RM228k is paid to the INEDs, averaging RM46k per person just to attend some board meeting. This does not include intangibles perks like potential business contacts and business deals. Perhaps, it is "miserly director's fees" to the author. But, try tell that to the Nasi Lemak Mak Cik who struggle to even earns RM20k per year to put her kids through school. Try tell that to countless of Indonesian workers who work like mad just to make roughly RM10+k per year. Yeah, RM20-46k per year to attend meeting and getting yourself reasonably updated seems to be a "miserly" pay. Yeah, you take up the role for "social responsibility", such a big sacrifice. Due to your need to be socially responsible, you decide to sacrifice some golf time to make RM20-46k.

P.S.: I am not writing this to shame anyone. That's why I am not naming names. Oh, BTW, the excessive fine that the INED is complaining about is just RM17.5k, less than what he earns for sacrificing some golf time.