Mainstream
Zakaria may leave FGV
Khairul Khalid 
Announcement on Zakaria’s future has been delayed since September
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The management turmoil plaguing Felda Global Ventures Holdings Bhd (FGV) seems closer to a conclusion with the reinstatement of three senior managers, but the biggest issue of an absentee CEO remains unresolved.

A source tells FocusM that head honcho Datuk Zakaria Arshad, who was asked to go on leave in June, could be falling out of favour and is likely on the way out, regardless of the outcome of the internal probe on alleged discrepancies.

“It looks unlikely at this moment that Zakaria will retain his position as CEO of FGV, regardless of the results of the domestic inquiry. He might be cleared of the allegations but it looks like the company is leaning towards having a new man in charge.”

The source adds that FGV could be exploring its options in view of Zakaria’s possible exit from the top post, including offering him another job in the group or negotiating his departure which could involve compensation-related matters.

“The new chairman (Datuk Wira Azhar Abdul Hamid) or the government may have their own ideas of who should lead the company. However, Zakaria is believed to be standing firm, which is causing some difficulties in removing him. He is still adamant in clearing his name of any wrongdoing.”

 

Government’s golden share

The government, through the Ministry of Finance Incorporated, owns a golden share in FGV and has the power to appoint or revoke the posts of chairman, CEO and one director to the FGV board. The ministry is headed by Prime Minister Datuk Seri Najib Razak, who is also Finance Minister.

The company has reinstated three senior managers involved in a domestic inquiry

Three senior managers of FGV and its subsidiaries have been reinstated after being on leave of absence since June on allegations of impropriety in transactions with an overseas client.

Delima Oil Products Sdn Bhd senior general manager Kamarzaman Abd Karim, FGV Trading Sdn Bhd CEO Ahmad Salman Omar and FGV chief financial officer Ahmad Tifli Mohd Talha have all returned to work in the last two weeks, leaving only Zakaria in limbo at press time.

The four were issued show cause letters and instructed to take leave of absence to facilitate an internal audit on alleged discrepancies within FGV. The internal investigations were initiated under previous FGV chairman Tan Sri Mohd Isa Abdul Samad, who has since stepped down.

The investigations were over alleged irregularities related to transactions between Delima Oil and its client Safitex Trading LLC, and was based on a report by external auditors PricewaterhouseCoopers.

On Sept 11, Azhar was appointed new FGV non-executive chairman, and subsequently also appointed chairman of Felda’s sugar refining subsidiary MSM Malaysia Holdings Bhd.

He was previously managing director of Malakoff Corp Bhd and was tipped as one of the main contenders for FGV’s top job. Hence, many were surprised that he was made non-executive chairman instead.

Speculation on Zakaria’s fate in FGV has been rife, with many top industry names linked to the job. He was positive about Azhar’s appointment and many saw it as indication that the CEO could be on the way back.

According to a filing with Bursa Malaysia, FGV was supposed to announce the results of its investigations on Zakaria in mid-September, but that hasn’t materialised, leading to market talk of a behind-the-scene tussle to remove him.

 

 

 

 

Dual role option

A market observer says it is possible that Azhar could take up a dual chairman-CEO position, if other options are exhausted.

“He has the track record and experience in leading plantation companies. He was also one of the top candidates for the FGV CEO post before being appointed chairman.

“He is in a non-executive role and taking over as CEO would not be out of the question. He would be able to implement the necessary changes instead of just overseeing it.

“Although it is not widely seen as the best practice (to have the same person as chairman and CEO) due to perceived check and balance issues, other listed companies are practising this,” says the observer, citing Eversendai Corp Bhd and Genting Bhd as examples.

Azhar was previously executive vice-president of Sime Darby Bhd’s plantation and agribusiness division, and served as its acting president and chief executive in 2010. Before joining Malakoff, he was CEO of Mass Rapid Transit Corp Sdn Bhd.

At press time, FGV has not responded to FocusM’s request for comments on the matter.

Other than Azhar, another likely candidate to replace Zakaria is Datuk Khairil Anuar Aziz, chief operating officer of FGV’s logistics and others sector. Last July, he was appointed officer-in-charge to take over interim duties and responsibilities of Zakaria as group president and CEO.

Khairil was initially rumoured to be a permanent replacement for Zakaria due to his background as a Felda settler’s son, just like Zakaria. However, critics have pointed out Khairil’s lack of track record in the plantation industry could be a shortcoming in leading FGV out of its troubles.

His expertise is in the logistics industry, however, could point to another direction in FGV’s future. FGV has indicated that it would be teaming up with other players to bid for logistics jobs in the RM55 bil East Coast Rail Link (ECRL) project.

Nevertheless, the source says Khairil is not a likely candidate for the top job at the moment. “His name was floated earlier on, but that seems unlikely now.”

 

Other possibilities

If FGV decides to promote someone from within its ranks to the top job, on paper it could be one of the current heads of department – head of palm upstream cluster Datuk Jamlus Aziz or head of palm downstream cluster Datuk Wira Adam.

Nevertheless, despite their experience in the industry, they have not been mentioned as potential candidates.

The Federal Land Development Authority (Felda) remains FGV’s largest shareholder with a 33.67% stake. FGV was incorporated as a private limited company in 2007 and, prior to listing, was Felda’s commercial arm.

Felda began when it was given over 850,000ha by the state governments under the Land Settlement Act 1960, of which 479,765ha went to smallholders. The remaining 355,000ha of oil palm estates were managed by its former subsidiary Felda Holdings Bhd (FHB), and injected into FGV on a 99-year lease when the latter went public in 2012.

FGV was supposed to be the jewel in Felda’s crown when it was listed on Bursa in what was then trumpeted as the world’s second largest initial public offering (IPO) after social media giant Facebook.

Since Felda listed FGV in 2012, its shares have fallen about 62% from the IPO price of RM4.55. Its 2012 listing raised RM10.5 bil.

FGV has a land-lease agreement (LLA) with its parent company which it signed in 2012. It states that FGV has to pay Felda RM248 mil annually for 20 years, plus a 15% share of operating profit from the sales of fresh fruit bunches gained from the land leased from Felda.

FGV has reportedly tried to improve the terms of the LLA, which has been a drag on earnings since it was listed in 2012. However, the terms and conditions of the agreement remain till now. FGV pays the LLA fees on a quarterly basis.



This article first appeared in Focus Malaysia Issue 253.