By P Gunasegaram
THERE are some key points for the board of AirAsia to seriously ponder and consider over the AirAsia-Airbus bribery scandal involving some RM204 million, which prosecutors allege involve directors of AirAsia.
Despite denials by AirAsia on involvement in bribery over the purchase of Airbus planes, via a direct statement from the company not attributed to any particular person or the board, there is no denying that there are unanswered allegations against two directors/employees which can only be answered by those concerned.
That also means that the board, which represents all shareholders of AirAsia, has an obligation to distance itself from the two and for independent directors to ascertain what exactly happened over this issue and take appropriate action.
The two specific allegations that need to be answered relate to court documents as part of a deferred prosecution agreement or DPA between Airbus and the UK’s Serious Fraud Office or SFO. Airbus agreed to pay 991 million Euros as a settlement under the DPA.
The two allegations involving AirAsia are in Paragraphs 39 and 40 of the document:
“The first count alleges that contrary to section 7 of the Bribery Act 2010, between 1 July 2011 and 1 June 2015, Airbus SE failed to prevent persons associated with Airbus SE from bribing others concerned with the purchase of aircraft by AirAsia and AirAsia X airlines from Airbus, namely directors and/or employees of AirAsia airlines where the said bribery was intended to obtain or retain business or advantage in the conduct of business for Airbus SE.
“AirAsia and AirAsia X are two major airlines in Southeast Asia, headquartered in Malaysia and were significant customers of Airbus at the time of the offences. Between October 2005 and November 2014, AirAsia and AirAsia X ordered 406 aircraft from Airbus, including 180 aircraft secured during the indictment period by way of improper payment (made by EADS France SAS, later Airbus Group SAS), and the offer of a further improper payment. The improper payment consisted of $50 million (and Airbus employees also offered but did not pay an additional $55 Million) paid to directors and/or employees of AirAsia and AirAsia X airlines as sponsorship for a sports team. The sports team was jointly owned by AirAsia Executive 1 and AirAsia Executive 2 but was legally unrelated to AirAsia and AirAsiaX. The additional improper payment was prevented by the October 2014 freeze on payments to BPs described at para 29 above.” Para 29 refers to the freezing of payments to intermediaries (referred to as BPs) via a directive.
According to a Guardian report in November 2015, Tan Sri Tony Fernandes and Datuk Kamarudin Meranun, respectively Group CEO and executive chairman of Air Asia Group Bhd, and major shareholders are listed as shareholders of Queens Parks Rangers. Fernandes and Meranun were also co-chairmen of F1 team Caterham.
These two – Fernandes and Kamarudin – are top executives and key shareholders of AirAsia and therefore are the ones who directly need to confirm or deny their part in these allegations.
Out of AirAsia’s current board of directors of seven besides Fernandes and Kamarudin there are four who are independent and one non-independent. As the allegations involved the executive chairman and the CEO, they should be excluded from the discussions on these matters.
The four independent directors and even the non-independent one owe a fiduciary duty to all shareholders of AirAsia. As it is, according to information on the investor relations website, Fernandes and Kamarudin own just 32.18% of AirAsia. The only other major shareholder listed is the Employees Provident Fund (EPF) with a 5.59% stake.
The board needs to do what is right for the large minority shareholders who form 68% of the ownership, considering that some measures may not be beneficial to the two who own the remaining 32%.
It would be appropriate to constitute a board of inquiry into the allegations which should be independent and should comprise of independent directors with the help of external professionals if necessary. This should go beyond establishing the truth and should consider measures to be taken if there is any truth.
These measures may even include AirAsia suing Airbus to recover any monies and other benefits which may have been lost as a result of bribery of top officials of AirAsia, especially since Airbus has implicitly accepted that it bribed AirAsia officials.
A clear stand on this issue by the board detailing out the measures it will take under all foreseeable circumstances and a commitment to getting to the bottom of it while ensuring all of AirAsia’s interests are protected will go a long way to maintaining its brand, reputation and goodwill, which it said it was concerned about in its statement.
That will go some way towards ameliorating any impact on the share price of both AirAsia and Air Asia X when they start trading tomorrow where the market will deliver its verdict and will be eagerly watching to see how AirAsia’s board of directors manage this crisis.
