Sime Darby a conglomerate gone awry — Tunku Abdul Aziz

There is a place for conglomerates in the business world. However, as with everything else, some are good, but mostly they invariably become unwieldy and difficult to manage effectively. Many come unstuck, leaving behind a trail of miserable examples of management failures, human greed and frailties.


As always, there is a lot of cleaning up to do after the party is over. The sad truth is that we do not as yet have what it takes to run a complex business successfully, and a conglomerate is hellishly difficult to keep on a straight course because the temptation to wander off into the unfamiliar is often irresistible, and most conglomerates find themselves up a creek.

There have been many instances of major failures in the Sime stables. There was the case of the insurance business in the UK in the eighties, a member of Lloyds, which was in such a bad shape because of mismanagement that it had to be bundled with a very profitable money-broking company into an attractive package and sold for a song.

Sime Darby naturally had to be responsible for all the liabilities resulting from claims on policies transacted up to the time of the sale of the company. For the next several years after the sale of the company to the new owners, Sime Darby continued to send out to the UK enormous sums of money to cover the claims.

Then there was the Sime Bank debacle. Banking was a business in which it had no expertise and had to rely on the management that came along with the bank when it was acquired. The integrity of many of the top executives running Sime Bank was questionable. What happened to the bank should have been a lesson to the board of Sime Darby about sticking to what it was good at.

I well remember in Windsor, England, saying jocularly to Tunku Tan Sri Ahmad Yahaya, then Group Chief Executive, when he told me Sime Darby had acquired a bank, that he would be better off getting a casino licence. Later he admitted that I was right.

I also recall the factory ship fiasco in the early eighties. The Sime Darby-owned vessel operating in the North Atlantic off the coast of Africa found itself in rough seas financially.

Sime Darby decided to sack its two British employees claiming that they had got into this business with the approval of the board in Kuala Lumpur. This was patently untrue. The Brits would not be bullied into submission, and they sued Sime Darby and its then chairman Tun Tan Siew Sin for wrongful dismissal, and won a very substantial sum of money in an out of court settlement. Datuk Seri Ahmad Zubir Murshid, the dismissed Group Chief Executive, should not have allowed the board of Sime Darby to treat him so shabbily.

I personally believe that with a loss of this scale of magnitude, an honourable board would have resigned because obviously it has failed to discharge its fiduciary and other related responsibilities of stewardship. Zubir has been used as a scapegoat in the Anglo-Malaysian corporate tradition. If Sime Darby had been an American company, the chair would have accepted responsibility and resigned or been forced to go without ceremony.

I find Tun Musa Hitam’s logic for staying put, saying that he would resign if required to do so by the shareholders, disingenuous and self-serving to say the least. He must know he has failed as chairman, and based on the principle of collective responsibility, his board must exit with him. This is the honourable thing expected of a responsible board, and this is what I expect the much trumpeted Sime tagline, “Developing Sustainable Futures” to be all about.

My advice to Zubir is to consider taking Musa and his board to the cleaners. Sue them. We need in this country boards that are principled, and we can also do with a little honour and integrity in our business leadership.

Sime Darby in the meantime must take a good, hard look at itself to see if operating on the present model is sustainable. It is obvious that Sime Darby has become largely unwieldy, unmanageable, and unsustainable. It is showing all the signs of having become a conglomerate in the worst possible sense. The worst is not over yet.



comments


Only an earth quake can force the boards of directors in Malaysia to resign to take responsibility for poor company performances. Take the case of Tabung Haji where millions are lost for investing dubious ventures somewhere in Central America. But the board remain and claimed ignorance. They never even apologise to the many depositors who put their hard earned money with the high hope that the money will be managed well and in halal ventures .