Paradoxes of Governance: Ownership and Control of Corporate Malaysia

Even though this country’s corporate history is replete with cases of business scandals, the issue of corporate governance in Malaysia only began to gain prominence in the late 1990s as a consequence of the 1997 financial crisis. Among the most prominent cases are the Bank Rakyat scandal1 in the 1970s and the Bank Bumiputra/BMF2 and Pan-El/Multi-Purpose Holdings3 scandals in the early 1980s. The most serious cases of poor corporate governance exposed in the late 1990s involved two government-owned institutions, Perwaja Steel and Bank Bumiputra, which were allegedly brought to the brink of bankruptcy due to fraud and mismanagement. When the financial crisis occurred, a number of Malaysia’s largest publicly-listed companies nearly collapsed, mainly because of debt accumulation and poor due diligence when acquiring firms; the best example of this was the politicallylinked conglomerate, Renong. The owners of some well-run government- owned institutions which had been privatized, like Malaysia Airlines (MAS), had also allegedly managed to destroy shareholder value due to unwise – and incompetent – management (see Asian Wall Street Journal, 2001, July 26). MAS was eventually re-nationalized at great public expense.