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Economists dismayed at huge pay rise for FGV chairman, board members

Publish date: Wed, 29 Jun 2022, 11:26 AM

KUALA LUMPUR: Economists have expressed dismay at the salary and allowance bump for FGV Holdings Bhd chairman and board of directors.

They said the chairman and board members should not have been rewarded with the hefty increase in fees and allowances despite sky-high crude palm oil (CPO) prices.

The generous remuneration was not appropriate considering rising inflation and the tough time faced by Felda settlers currently, they added.

Putra Business School associate professor Dr Ahmed Razman Abdul Latif said the present sky-high CPO prices were not to the credit of the FGIV chairman and board members. 

"FGV made huge profits recently not because of their exceptional board of directors, but rather due to external factors. The same board of directors were there when FGV suffered from losses and the huge profit made recently might be temporary as CPO prices have started to decline," he told the New Straits Times.

"Will they reduce the remuneration and their benefits next year when CPO price becomes lower?" Ahmed Razman asked.

He said although it was legally allowed when majority of FGV shareholders approved it, the remuneration still did not take into consideration the well-being of other stakeholders such as its minority shareholders, employees and settlers as well as public sentiment.

"When compared to other plantation companies listed on Bursa Malaysia, the new remuneration and benefits are higher than their competitors, although FGV's market capitalisation is lower than them," he said.

Minority Shareholders Watchdog Group chief executive officer Devanesan Evanson said board members' remuneration should be based on key performance indicators (KPIs).

Devanesan said one should not use market capital of similar companies as a yardstick to justify remuneration increases.

"Market capitalisation has hardly any correlation to performance. Likewise, remuneration should not be based on profitability of the company. This is because profitability may be a result of external factors over which the board has no control," he said.

Rising CPO prices might result in profitability, but it was not within the control of the company. As such, he said the board should not take the credit for it by using it as a basis for increased remuneration.

"Similarly, the board should not be penalised when CPO prices fall, resulting in a loss to the company. But rather, the remuneration of the board should correlate to the KPIs which are within their control.

"They should evaluate how effective they are, how efficient they are, and how economic they are compared to their sector peers. These are the measures that should be used to justify remuneration increases," he said.

Universiti Malaya associate professor Dr Awang Azman Awang Pawi said the huge increase was not apt when inflation was hitting the masses and Felda settlers in particular hard.

"FGV does not seem to be sensitive to people's problems. This resolution is not inappropriate when the government wants prudent spending measures. The chairman of (FGV parent) Felda is a politician, he should be more sensitive and avoid the anger of the people which will cause a bad reputation for Umno, at a time the party has just recovered," Awang Azman said.

FGV shareholders had passed 13 resolutions at its AGM last week to among others, raise its non-executive chairman's yearly fee to RM480,000 from RM300,000 previously.

The chairman would receive a monthly fee of RM40,000, up by RM15,000 as part of a new fee structure that took effect on June 24.

At the same time, seven other FGV non-executive directors would receive a monthly fee of RM12,500 until the next AGM, a RM2,500 increment.

FGV on Monday clarified that it had earlier this year appointed an independent consultant to conduct a review and benchmarking on board remuneration.

The board was advised by the consultant that the car allowance for its non-executive chairman Datuk Dzulkifli Abd Wahab be replaced with a company car.

This was due to the fact that it was not reflective of market and sectorial norms as companies did not generally monetise the provision of a company car benefit in the form of allowances, it said.

The non-executive chairman is accorded to receive on a cash basis, a director's fee of RM300,000 a year (or RM25,000 per month) and car allowance of RM180,000 annually (or RM15,000 per month).

"Pursuant to the advice, FGV board proposed to provide a company car to the non-executive chairman and maintain the amount of cash accorded to him previously by converting the car allowance of RM180,000 to board fees.

"Hence, there is no increase in the total cash received by the non-executive chairman," FGV said.

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