……………. should comprise of professionals and qualified people and not politicians or nominees of political parties.
Recently, the former chief executive officer (CEO) of Felda Investment Corporation Sdn Bhd (FIC) was charged for deceiving the FIC board of directors that led the board to approve a project, an approval it would not have given had it not been misled.
Deceiving the board of Directors?
Where was the board?
While it might seem absurd that the CEO bears criminal or civil liability alone when a board fails to catch deception, corporate law and the legal system draw a sharp line between active fraud and a breach of oversight.
Where does the CEO's liability end and the board’s responsibility begin?
If a CEO intentionally lies, alters documents, or hides critical information, he is committing fraud.
Yes, the rule presumes that directors act in good faith, on an informed basis, and in the honest belief that their actions are in the best interest of the company.
Legally, a board is entitled to rely on the reports and expertise of the company's executive officers (like the CEO and CFO) unless there are obvious "red flags" that they willfully ignored.
But a responsible Board who puts good governance in the companies they are appointed to would not hesitate to instruct the CEO to set up internal controls to verify the data.
Was that done in this particular case?
Are any of the individual board members knew about the deception and helped cover it up?
Corporate governance in today’s world is unlike 10 years ago.
If a board believes the CEO, their failure to double-check is generally classified as negligence or a failure of oversight.
In the eyes of the law, being fooled by a sophisticated liar is not the same as being a co-conspirator to the lie.
Corporate governance principles state that a board of directors holds the ultimate fiduciary duty to oversee management, meaning they cannot simply act as a rubber stamp for the CEO.
Directors must act with the diligence and care that a reasonably prudent person would use. This means actively interrogating reports, asking tough questions, and verifying the data presented by the CEO rather than taking it at face value.
Directors must act in good faith and in the best interests of the corporation and its shareholders, putting those interests above their personal relationship with the CEO.
When a board fails to challenge a CEO's proposals, blind spots develop, and risks multiply.
In this case, it is not a surprise that the board trusted the CEO blindly and thus failed to perform their oversight duties.
This is one big reason why politicians or nominees of political parties should not be appointed to the Board of GLC and government agencies.
It doesn’t matter that they are qualified professionals.
Only professionals who don’t doubled up as politicians.
Follow Bank Negara Malaysia rules where politicians are strictly not allowed to be on the board of financial institutions in Malaysia.
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