Why do Khazanah kept appointing wrong CEOs, failed to control and monitor their CEOs performance and late to spot any wrongdoings?
DRB-Hicom Berhad announced the two week suspension of CEO of Group Lotus PLC, Dany T Bahar to facilitate an investigation into a complaint of his conduct on May 28th. Read Rocky Bru here.
The investigation is most welcomed because Lotus has never contributed to Proton's bottom line but dependent on Proton for revenue and profitability.
There is concern with Lotus since Proton had guaranteed their borrowing for £270 million (equivalent at current rate to RM1.214 billion) supposedly to introduce new models and expand manufacturing operations.
Bahar, the former F1 senior executive of Red Bull and Ferari team has not delivered on his promise made when hired as Lotus CEO on October 1st, 2009. His extravagant film star lifestyle at the cost of Lotus is in question.
Yet his contract was extended by Proton and Khazanah till 2014 before DRB-Hicom took over. Why?
Critics of Temasek-style Khazanah inherited from the previous administration, would pose the questions:
Why did Khazanah selected Bahar in 2009 and extended his contract till 2014? Was the F1 and marketing man appropriate for the post and business plan then? Why do Khazanah kept making the same mistakes in the appointments of CEOs and neglect their control and monitoring role? Do they think their responsibility ends after appointing a CEO?
Background on Dany Bahar
On February 28th, Rocky Bru here asked why Bahar's contract was extended till 2014. He tipped-off that CIMB and Maybank's held back release of £70 odd million of a £270 million (RM 1.2 billion) loan to Lotus and part of the money may have made it's way to Thailand.
However, BBC (available on Bigdogdotcom here) reported that it was the Malaysian Government that held back £10.4 million of funding.
Nevertheless, Bahar remained a matter of concern because he has not delivered on his promises made to the Proton Board of Directors when he was hired on October 1, 2009. That Board of Directors was controlled by Khazanah.
Usually, car manufacturer would introduce a single model for each selected market segment per launch. Bahar did the unheard thing for a struggling car manufacturer to launch 5 newest street models in 2010. [Read here.]
Who is this Dany Bahar?
The following is compiled from the website http://www.lotusdanybahar.com:
Bahar was Red Bull’s Chief Operating Officer from 2003 to 2007. He oversaw and was responsible for the overall corporate business development with emphasis on marketing, sales and events.
At Red Bull, he developed the two-prong F1 entry strategy with Red Bull Racing (formerly Team Jaguar) and the establishment of Scuderia Toro Rosso (Red Bull Racing is the “A-team”, and Toro Rosso is designed to develop new drivers).
From 2007 to 2009, he was the senior vice-president of the Sales, Marketing and Communications department for Ferrari SpA. He was responsible for worldwide road car sales and after sales business, overall road car and F1 marketing activities, licensing, and merchandising business.
Bahar was the CEO of Group Lotus since October 1, 2009. The Turkish-born Swiss holds an MBA from MC Institute of Vevey/Lausanne.
He took over the post from Michael Kimberley who was Acting CEO of the Company and Group from May 2006.
Kimberly currently chairs the Executive Committee of Lotus Group International Limited ("LGIL") established in February 2006, with Syed Zainal Abidin (Managing Director of Proton) and Badrul Feisal (non-executive director of Proton). LGIL is the holding company of Lotus Group Plc.
Lotus Cars is a British manufacturer of sports and racing cars based at the former site of RAF Hethel, a World War II airfield in Norfolk. The company designs and builds race and production automobiles of light weight and fine handling characteristics.
Lotus also acts as an engineering consultancy, providing engineering development—particularly of suspension—for other car manufacturers.
The lesser known Powertrain department is responsible for the design and development of the 4-cylinder Ecotec engine found in many of GM's Vauxhall, Opel, Saab, Chevrolet and Saturn cars. Today, the current Lotus Elise and Exige models use the 1.8L VVTL-i I4 from Toyota's late Celica GT-S and the Matrix XRS.
Proton took over lotus from the bankrupt former owner Romano Artioli in 1996. Earlier, Artioli bought the company from General Motors for £30 million on August 25, 1993. GM in turn bought from the estate of the original entrepreneur Engineer Colin Chapman in 1986. Chapman died in 1982 and was attribute for building Lotus since 1952.
Why did Khazanah-controlled Board of Directors of Proton hired Bahar? What was the basis to hire a high flyer lifestyled senior executive for F1 racing team operation? Was it in sync with Proton's plan for Lotus to transform it from its design operation to manufacturing?
The following extracts are from reports in the British financial website, This is Money.co.uk here, below:
Financial Mail has established that the accusations centre on hundreds of thousands of pounds spent refurbishing his rented home, and more than £1 million on private aircraft, including jets and helicopters to fly Bahar to Formula 1 races and other events around the world.
Friends: Dany Bahar, left, with singer Alicia Keys and her husband, rapper Swizz Beatz, who was given a job with Lotus
Bahar does not contest any of this, but according to friends he insists the spending was all part of his employment contract and entirely appropriate for the boss of a luxury car brand involved in Formula 1.
What appears to have infuriated DRB is that while Bahar enjoyed the lifestyle of successful luxury products company boss, Norfolk-based Lotus lost more than £1 million in 2011 and has debts of £200million.
Bahar, 41, who was born in Turkey but is now a Swiss citizen, was paid £1.2 million for his job and mixed with stars such as singer Alicia Keys and her husband, New York rapper Swizz Beatz.
Bahar appointed Beatz as Lotus’s vice-president of creative design and global marketing.
A month after the Malaysians bought Lotus, they began investigating the running of the company and how it was performing. It was this examination by accountancy giant Ernst & Young and a team from financial adviser Rothschild Group that resulted in Bahar’s suspension on May 25 while an investigation was launched into a complaint about his conduct.
Refurbished: Dany Bahar's rented home
The company and Bahar have refused to comment on the affair, or even to go into the reasons for the suspension of Bahar, who was appointed to the role only in October 2009 having been recruited from Ferrari by previous owner Proton, another Malaysian company.
But Financial Mail understands that the accusations concern Bahar’s alleged extravagant use of company money and an interpretation of his contract, which was drawn up with Proton.
According to industry sources, the charges relate to the contract itself as well as expenditure on a rented home in Norfolk, company spending beyond agreed limits and using company money to travel excessively by helicopter and business jets, something said to have astonished the new owners.
But Bahar’s friends insist that all expenditure was specifically written into his contract. They also say he had permission to use helicopters and jets because this was the way that business was done in the supercharged world of Formula 1.
It was part of his job to represent Lotus all over the world where the cars were racing and where its engines were being used.
It is also claimed by his friends that Bahar had permission in his contract to approve expenditure up to £5million and to do up his rented house for about £35,000.
Bahar’s friends insist the issue of his home is typical of the way he is being smeared. ‘When he was headhunted by Lotus, they agreed to rent him a small house until he found a more suitable home,’ said one.
‘He did find a house and a deal was reached with the landlord that for no rent for a while the home would be refurbished. The bill for this work, which was around £35,0000, was paid for initially by Lotus, but the key thing is, he is paying the company back through his monthly pay packet on a regular basis.’
There should have been no surprise when he was appointed that he was a man who lived a glamorous lifestyle.
Salaried executive with a £5 million house renovation?
Another is comments from Top Speed blog here, below:
... New details have come to the front that show his suspension is for far worse reasons than just a flame-post on a social media board. It turns out that Lotus has been footing the bill for Bahar to rent two houses, which is not uncommon for a CEO, but what is uncommon is a £375,000 ($589,000) builder’s bill for renovations to said rental house that was paid by Lotus.
Obviously Lotus shut off that leaky water valve at one point, leaving £92,000 ($144,450) of a builder’s bill unpaid, resulting in Bahar being taken to High Court, according to reports. So now this suspended CEO may be in for a little more than just jabs from us media folk as he may be in for some criminal charges, if he is found to have defrauded Lotus.
Then again, Bahar collecting his minimal pay package of £1.2 million ($1.48 million) after sending Lotus further into ruins since he took over in 2009 is fraud enough for us. So it looks like we are not quite done talking about Bahar yet and he will likely not go away quietly, given his loudmouth reputation. ...--------------------
Incompetent Business Manager
Proton was one of the three companies assigned to Khazanah to turnaround. The other two being United Engineers (UEM) and Malaysian Airlines (MAS).
To-date, Khazanah did not operationally turnaround all three. UEM was delisted arising from failed projects in Dubai and the public listing status taken over by subsidiary UEM Land.
Gawd ... one wonders what happened to the Dubai failed project since it is no more in the radar of Bursa?
For MAS, the right thing to do was to get an Airliner to be CEO but Danny Nanny was the eager beaver CEO and former senior executive of NST and CEO of Malakoff, Ahmad Jauhari was appointed.
After 8 months of CCF, the Khazanah-appointed management team is still blur on the appropriate organisation structure and the business plan for MAS. They are only kow towing to the wishes of Air Asia.
Their plan to raise the RM2.5 billion Sukuk bond only shows their lack of creativity, inside the box mentality, and no workable business model. So much for Oxfords, Cambridges and Tingkat 4 geniuses!
Now finally, Proton had to be sold back to DRB-Hicom. And it is the original owner that end up to do the turnaround. Proton's presence under Khazanah portfolio for all these years was a waste of time.
With the latest debacle in Lotus, the concern to the Malaysian public should be Proton's guarantee and Malaysian Banks loan of £270 million to Lotus PLC.
Although there are those that claimed Proton is now privately owned by Tan Sri Syed Mokhtar controlled PLC, DRB-Hicom, Proton remains a public company and naturally of public interest. The Government still have direct and indirect interest in Proton and Proton's Lotus.
The suspension of Lotus PLC CEO on suspicion of impropriety raised the ability of Khazanah to control and monitor their investee companies.
Not only has Khazanah failed in practically all of its new venture, local and abroad, they failed in turning around loss making GLCs and perhaps, worsen the performance of money making GLCs.
That is the legacy of Tun Abdullah and Tan Sri Nor Mohamad Yakcop and the perpetual destructive hands of Khairy Jamaluddin and Tingkat 4 boys, that include the names of Tan Sri Azman Mokhtar (Amokh) and Rashdan Yusof (Danny Nanny) in the list.
Take note of the listing of Integrated Healthcare.
It is nothing more than hiding the exorbitantly overprice purchases of Singapore Parkway, Indian healtycare company, Apollo and Turkish healthcare group, Acibadem by creating a merger with Pantai and IMU.
The controversial Shah Alam hospital is still far cheaper at construction cost of RM750,000 per bed when compared to the per bed purchase price of Parkway, and maybe that of Apollo and Acibadem.
Not to mention the past dumb move of allowing the Singaporean management control in Khazanah majority Pantai with subsidiary Fomemaas subsidiary.
Flawed CEO Appointments
The gross mistake of Khazanah lies in the fact that the CEO himself, Tan Sri Azman Mokhtar is not the appropriate person with the visionary view, strategic mindset, and business operations and management experience to run Khazanah.
Khazanah is supposedly to be strategic investment for the country's future economic growth and other strategic and socio-economic roles.
Instead, Amokh is merely an analyst, thus run Khazanah as a Fund Manager concern for "fair return" in comparison to the return of other Fund Managers.
His attitude about see losses is one "win some lose some". Is he doing things based on gut feel to purchase and sell stocks for a portfolio without any sense of responsibility and concern for public money and future of the nation at stake?
Since Amokh is running an organisation with many companies under, he has to be strategic in his decision and not tactically political in expediting.
Strategically, at the implementation stage of any corporate strategy, the choice of CEO is the most important. It is the CEO that will drive the formulation of company corporate strategy or business plan, head to lead the organisation structure to implement the strategy, and the day to day affair of running the company.
Thus far, Khazanah not only failed in their choices of CEO but does not show they have the basic understanding of fitting a person background with the strategy and company situational background required.
Harun Johari, a former logistic Shell man and Tan Sri Azman Mokhtar's MCOBA buddy was a case of the wrong background to head Iskandar Regional Development Authority and had to be removed.
Despite failing big time, he was brought back into Khazanah to lead other failures.
Latest heard, he failed again in leading Khazanah's investment in a agricultural product distribution company and there will be a financial restructuring magic to merge and cover-up another of his failure. [Read our old posting here.]
In late December last year, the husband of the former CEO for Iskandar Investment Berhad, Arlida Ariff, Mohd Amin Suhaimi was charged for seeking money from companies for projects involving IIB.
Another classic Khazanah CEO appointment.
At the same time, there were two former Directors arrested. A Senior Vice President fined after admitting guilty in court. [Read us here.] Looks like Khazanah had done something.
Sources from amongst former high officials of IIB claimed that all decisions and deals involving IIB or IRDA leads to two former Union Bank of Switzerland executives in Khazanah; namely Khazanah CEO, Amokh himself and Executive Director for Investment, Ganen Saravanam.
No one except Amokh and Ganen can explain the issues raised in two letters on the Medini project. The Khaznaah reply still did not enter.
The talk now is that those arrested or charged were made scapegoats that was asked to take the fall.
Then, the classic current management of MAS.
The CEO is a one type business CEO that does not fit with the technology to soft skill requirement of an Airline CEO.
Managing Director cum CEO Ahmad Jauhari is required to understand the new business he is in and turnaround or rebuild the Company with hidden hands wanting to destroy MAS for Airasia to cannibalise.
The MAS Chairman, Tan Sri Mohd Nor Yusof and eager beaver Deputy Managing Director, Rashdan Danny Yusof was involved in the failed WAU inspired by the consulting firm of Binafikir that was the partnership of Amokh and Danny. [Read here.]
Despite repeated request for an Airliner to be CEO, it turns out that AJ was chosen because Amokh only appoint CEO from among his friends and AJ had given Bina Fikir consulting job when he was Malakoff CEO.
A job for retired friend?
No Control and Monitoring
Talking of strategy ....
Upon selection of CEO, establishing the organisation structure and execution of strategy, the Board of directors and for Khazanah investee companies, Khazanah should not blindly let loose the company and CEO.
There should be some form of monitoring and controlling on the performance of their companies, monitor the company and industry development, and on the lookout for nonsense. Intervene before shit happens and not when it hits the ceiling.
Khazanah seemed to be doing something when they seconded a MAS auditor, accountant and certified in internal control by the name of Raja Azura Raja Mahayuddin to Khazanah.
Supposedly she will put in place a system to reduce systematic failure in the likes of Bahar. [Read her background here.]
Bahar was wrong from the beginning. Khazanah should have learned from the appointment of "salesman" Dato Fuad Dahalan to MAS CEO post after Mohd Nor Yusof financial restructuring assignment.
Bahar was known for his F1 involvement and more a sales and marketing man than a design and manufacture man. When he was asked to head Lotus PLC, Proton had planned for Lotus to beef up its production and manufacturing.
No one in Proton or Khazanah had the business sense to realised that launching four new models in the same market segment at the same time was the wrong thing to do. Now ... the Board Members of Lotus and Proton should also be sacked!
Unfortunately, Raja Azura was assigned by Khazanah as Head of Human Capital to replace the former Head with legal background and assigned CEO of Yayasan Penaraju Pendidikan Bumiputera.
She was also Head of Human Resource at MAS. Oh Malaysia, oh Malaysia ... lawyers and accountants as head of Human Resource?
Gawd knows ... what did she do in MAS because Khazanah has a habit of taking in failed executives like former CEO of MAS, Tengku Dato Raja Azmil, former executive of SIme Darby, Hisham Hamdan, and many like them.
Her appointment have attracted criticism. It raised the case of someone not involved ever in education heading an education foundation. An influential and insider informed blog, Gelagat Anwar here is asking: Hanya orang Khazanah saja yang layak? (Are only Khazanah people qualified?)
The question is valid because that seemed to be the prevailing trend in Khazanah. The appointment of key personnel are only jobs for the boys!
That would mean jobs for former office mates like Ganen and business partners like Danny Nanny. Also for kawan-kawan asrama di Kuala Kangsar in which there are lots of them throughout the organisation.
It does not seem to be based on merit, capability and vision but know who.
Heard that even proletariat background, non-elitist ANSARA are picking up the bad habits of MCOBA elites in Khazanah. This is the prevailing elite culture in Khazanah and it is spreading elsewhere in its investee companies.
Not only is it about jobs but contract for the boys!
And capable business people and sub-contractors are conned and victimised by our GLCs on based on small print clauses at the end of agreement to enable their collegian friends to takeover contracts from unsuspecting victims.
It is becoming prevalent. That is for an upcoming expose.
* Edited 5/6/2012 12:00 PM