Monday, March 25, 2013

When you have a board of chairmen, nothing moves...


WHEN YOU HAVE A BOARD OF CHAIRMEN, NOTHING MOVES

1982

This was exactly what happened to Highlands & Lowlands Berhad in the early 80s.

High & Low, as it was known to its fans[1], must have been one of the most envied companies then. It had a paid-up capital of about RM150 million, a big one during those days. But what made High & Low very exceptional were its formidable cash hordes and its highly visible landbank in the Klang Valley. RM250 million of its shareholders’ funds of RM500 million was operationally superfluous. It was in the form of cash and mostly placed with banks as fixed deposits to earn interests. During times when the prices of rubber and palm oil were low, High & Low could still hand out good dividends all the same – thanks to the interest incomes.

Ten of High & Low’s twenty estates were in Selangor. Some of these were right in the Klang Valley and became the obvious target of the authorities when they wanted land for “public” purpose. Shah Alam was in fact carved out from three of its Klang Valley estates: Sungei Renggam, Bukit Jelutong/Rasak and Midlands. So were Kuala Lumpur’s Subang Airport, the adjacent Malaysian Air Force Headquarters and Selangor’s State Sports Complex.

High & Low sold some of the land also. An example is the 1,500-or-so-acre property at the junction of Jalan Damansara and Jalan Kepong, once known as Edinburgh Estate. Today the township that has taken shape there is called Taman Maluri.

In spite of all these, High & Low was and still is the biggest owner of land with real estate potential in the Klang Valley. You do not see High & Low’s signboards anymore because the company is now a member of the Guthrie group. But Bukit Jelutong/Rasak, Midlands (now Shah Alam), Subang, Emerald (now Zamrud), Highlands (now Bukit Tinggi), Vallambrosa (now Kapar) and Elmina are High & Low’s and if you know where they are, you will agree with me that they are real-estate gold mines.

With its resources, High & Low could have taken over a bank or two if it had wanted to. (There was no ownership restriction then. Moreover, you could count with the fingers in your hands the number of local banks that had bigger net worth than High & Low’s at that time.) There were indeed many take-over opportunities: many listed companies were on the block; prime properties across the Causeway were also not expensive; many estates were being sold cheaply because of depressed commodity prices, etc. But all High & Low could manage was the acquisition of a small 1,000-acre oil palm estate in a very remote corner of Perak before the company was itself taken over by Guthrie in 1985.

Why was it so?

High & Low had a board of chairmen, not directors!

* * * * *   

I was High & Low’s manager of corporate planning. It was essentially a one-man show, discounting my secretary and driver.

The first task I set for myself was the preparation of a corporate diversification plan, and thinking that property development would be an obvious starting point, I mapped out a framework with which High & Low could systematically realize the real estate potential of its vast landbank in the Klang Valley. The executive committee and the board duly accepted the recommendation. But after that it was paper after paper, and review after review. Nothing moved.

I also approached merchant bankers, stock brokers, investment authorities, venture capital companies, overseas manufacturers and friends for business leads and possible joint ventures. Initially we were deluged with offers, but soon people saw through us. We were just wasting their time.

Decision-making in High & Low was a mind-boggling process. The board comprised Dr Syed Mahmood, who was the chairman, the late Tun Ismail Mohd Ali, the late Tun Tan Siew Sin, Raja Tan Sri M Alias, the late Tan Sri Lee Loy Seng, Tunku Shariman, Datuk Syed Kechik, Charles Letts, Tengku Robert Hamzah and the late Yeoh Chin Hin. Every one of them was a company chairman in his own right.

On day-to-day operational matters, there were two general managers – one looking after Plantations and the other, Finance and Administration. There was no chief executive. The general managers had little authority and most matters were referred to the directors. But few at that level had time for High & Low. What the board did was to entrust the authority to an executive committee made up of Dr Syed Mahmood, the late Tun Ismail, the late Tan Sri Lee and Raja Tan Sri M Alias which would meet once in about two months. All proposals and decisions required of the executive committee had to be formally prepared in a prescribed format and submitted to the company secretary a week or so before the committee met. It was the prerogative of the executive committee either to make a decision or to refer the recommendation to the board.

A proposal could win approval one day and had it withdrawn the following day. Very frustrating indeed!

When you had a board of chairmen, meetings were usually a free-for-all affair. At their level, it was natural that everybody had a big ego. Some were quite petty also. I should not forget to mention their prejudices too – you have to believe me!

I had the opportunity to “defend” my papers in the executive committee meetings. I was, however, rarely given a chance to do so at the board level. Our kind Cik Halimatus, High & Low’s company secretary, would come to see me after each board meeting. “Hard work down the drain, I suppose?” I would ask. If there was good news, she would give me a big smile. Otherwise, she would always console me by saying, “Mr. Lim, I don’t know why they are always like that…” The reason could be anything, ranging from patronizing reservations voiced by one of the directors out of his personal prejudices to a typographical error in your paper, or to outright proxy intrigues between the different interest groups in the boardroom (none of High & Low’s big shareholders, namely Permodalan Nasional Berhad, Felda (Federal Land Development Authority), Kuala Lumpur-Kepong, and PERNAS was in a position to exercise full control of the board) or to, guess what, the unfavourable mood of the late Tun Ismail, who was really the first amongst equals there. But what was particularly frustrating was the fact that one had to live with the type of ignorance displayed by some of the leading captains of the corporate world of the day.

Maybe I was naive; the stakes were too big for me to understand. Maybe they were just play-acting?

* * * * *    

YOUNG MAN, I AM SPEAKING FROM MY EXPERIENCE, YOU KNOW!

High & Low’s Midlands Estate sat visibly along the Kuala Lumpur-Klang Highway. However, its size kept shrinking, thanks to the rapid pace of urbanization in the Klang Valley. Even after the completion of the Federal Highway and the finalization of the Shah Alam municipal boundary, Midlands remained vulnerable.

Sometime in 1980, High & Low received a land acquisition notice from the state government of Selangor. A piece of land in Midlands had been identified for some public purpose. The land, measuring about 84 acres, is a developer’s dream. Its southern front is close to the Federal Highway. On its right, it has Shah Alam as its immediate neighbours…

The public purpose the state government had in mind turned out to be the extension of the adjacent Shah Alam municipality. High & Low was renting two floors at Wisma Budiman for its head-office use. When it was known that the land was intended for the extension of the municipality, the board decided that the company should approach the government to rescind the acquisition order. After all, High & Low had the resources to help develop Shah Alam.
 
A team, comprising the chairman of the company Dr Syed Mahmood and two directors - the late Tun Ismail and Tengku Robert Hamzah - was duly dispatched to see the Menteri Besar, who was Dato’ Rafei Hormat then. The Menteri Besar saw the merit of the proposal. He was glad to leave the development of the land to High & Low.
 
Tengku Robert, who is also an architect, was given the task of coming up with a comprehensive development plan for the area. Besides the head-office building, he was told to look into having a hypermarket, a private school, a private hospital, etc. Someone suggested that part of the land could be turned into a High & Low “village” – a kind of residential complex for the executives and staff. The board was agreeable to this. I was told to organize the development. Obviously the first thing to do was to draw up an implementation schedule. I also saw the need for the early appointment of a project manager. To me, you cannot leave the project to the consultants alone. Although they are professionally accountable to the client for their designs and the progress and quality at site, their priorities are different. Moreover, with due respect, few of them are good managers. My experience in handling the construction of the Bank Pertanian building at Lebuh Pasar Besar taught me an important lesson in project management: You have to be fair to the contractors. Consultants tend to wield their big sticks and contractors, on the other hand, will find every excuse to claim VOs, or variation orders – works that are originally not in the contract but commissioned out of site or other necessities. Their approach to issues is always confrontational or “we-versus-they” in both form and substance. Priorities are lost and projects invariably get delayed.
 
In one of the executive committee meetings, I argued my case for the recruitment of a suitable candidate for this position. The late Tun disagreed with the job specifications outlined in my paper.
 
His concept of a project manager was someone who would diligently check the materials and construction practices at site. We were far from starting the construction work yet. I knew I had been misunderstood.
 
As I was trying to explain to the late Tun the difference between the two roles, he cut me out and said, “Young man, I know what I am talking, you know! I am talking from my experience…”
 
You couldn’t argue with the late Tun.
 
* * * * *
 
The late Tun had strong likes and dislikes. He did not forgive easily, I was told.
 
I have no means to verify the following story, but I believe there is some truth in it.
 
The story went this way:
 
There was this senior economist in the Central Bank who was asked to prepare an analysis for the late Tun, who was the governor then.
 
His day was ruined after he got the report back from Tun.
 
In one of the pages, Tun had made a circle around a term, drawn a line all the way to the bottom of the page and written, “Is there such a term?”
 
The term that was circled by Tun was NEGATIVE RETURNS. This term is commonly used by those in financial circles to describe a loss-making situation. But sure if you examine the term closely, you will realise that Tun was absolutely right. Returns are always positive. How can one have negative returns? Think about that.
 
I was told this senior economist did not stay with the bank. Apparently, it was also a blessing in disguise for him. He is now someone big in the corporate world.
 
* * * * *
 
My colleague Khairil was asked to coordinate the preparation of the chairman’s statement for High & Low’s annual report. He was supposed to edit all the inputs and add coherency to the text.
 
The draft was presented to the board for approval.
 
Tun’s annoyance was immediately noticed.
 
What was this term “add value”? “Who wrote this?”
 
“Khairil.”
 
“Is he local?”
 
“Yes, Tun.”
 
“No wonder!”
 
Khairil was not in the meeting. I do not know how he would have reacted if he had been there.
 
Tun did not go to Harvard Business School. In Harvard, saying “add value” can be as easy as going to the loo.
 
Khairil’s MBA was from Harvard.
 
* * * * *
 
My experience with the late Tun on the use of English was no happier either.
 
High & Low’s landbank in the Klang Valley, as I have said, is the envy of many. I described some places as “developable”; I did not forget the close-and-open inverted commas.
 
He turned to me, “Why can’t you say land with development potential instead?”
 
I had no answer.
 
* * * * *  
 
Tun was however tolerant to some.
 
I was told his right hand man at PNB was quite casual with his use of English and yet the late Tun did not mind.
 
But how can you compare yourself with Datuk Khalid whose scope of responsibilities is so vast that his misuse of English is excusable.
 
* * * * *  
 
COKE, PLEASE
 
It was sometime in 1984.
 
There was this big dinner to raise funds for the Tun Hussein Onn Eye Hospital at the Kuala Lumpur Hilton. Being one of the top ten companies in the KLSE, High & Low was expected to be generous for a worthy cause. It  “bought” a RM25,000 table.
 
Dr Syed Mahmood was to be the host of the table, since he was the chairman of the company. It was supposed to be an “all-directors” function.
 
Once it was confirmed that the late Tun and the late Toh Puan would be able to make it, the other directors began to send their RSVP regrets to Dr Syed, although some had earlier indicated their willingness to grace the occasion. Excuse? – Last-minute urgent matters to attend to lah! All very coincidental!
 
You cannot leave the table half-empty, can you?
 
The two general managers had naturally to oblige. They should bring along their spouses too. There were two more places to be filled. The “privilege” fell on yours faithfully and his madam.
 
* * * * *    
 
The dinner was a grand event, virtually every who’s who in town was there. But the mood of our table was a subdued one. Except for a few occasions when the witty Toh Puan would take aim at Tun and make us misbehave ourselves in front of Tun, it was just food, food, and food.
 
When Tun was on your table, you could be sure few would bother to approach you.
 
I remember a Datuk Somebody that night. When he spotted Sayed Mohamed, one of High & Low’s two general managers, from afar, he decided to waltz his way through the crowd to greet an old friend. As soon as the familiar bald patch surfaced before him than he froze and stammered, “Tun”, took a 360-degree turn and marched back. I cannot recall if he had said hello to his old friend Sayed Mohamed.

“Sir, may I have your order please?” After the waiter had completed taking the ladies’ orders, I was the first to be given the honour.

“Vodka lime.” I suddenly realised everyone was looking scornfully at me. How indiscreet of me. “The Korean 747 has just been shot down over the Sakhalin Peninsula. Don’t you know that we should boycott everything Russian?”

Next was the late Aziz (the other High & Low GM)’s turn. “Coke.”

What? Coke for this occasion? I thought he liked something else.

Tuan Sayed, how about you? Can’t be Coke I suppose.

“Coke, please.” Coming from Sayed’s mouth, it was unbelievable.

Had I committed an unforgivable sin in front of Tun and Dr Syed?

Everyone knows Dr Syed does not drink. It did not surprise me when he asked for water.

When it was the late Tun’s turn, he asked for what he desired, no more, no less. And I know it was no fruit juice.

* * * * *    
 
I was comparing notes on the late Tun with someone the other day.

He updated me with this story:

There was this board meeting. Tun had excused himself to go to the loo.

Without him, no major decision could be made. Everybody was happy as they could stretch themselves a little. Soon the boardroom was full of life.

Ten minutes passed, no sign of Tun, good! We can continue talking or do some catching up.

Half an hour later, still no sign of Tun. Maybe Tun has a bad stomach.

One hour later, how come ah? Something must be wrong

A search and rescue team was promptly dispatched to the executive restroom.

No trace of Tun either.

Quick, call the house.

“Yes, Tun is in.”

Apparently, after easing himself, Tun headed for home straight. He had forgotten that the board meeting had yet to be adjourned!

* * * * *

ACCOUNTANT – DOESN’T THE WORD SOUND LIKE “I-COUNT-TEN”?


High & Low owned 26,400 shares in H&C Latex, a very small holding indeed, compared to Harrisons Malaysia (now Golden Hope)’s how-many-million shares.

Harrisons wrote to enquire if High & Low would be prepared to part with its shares in H&C Latex. Harrisons wanted 100% ownership in H&C Latex. It was prepared to offer a price of RM63.71 per share.

Why so good a price? Wasn’t the investment carried in the books of High & Low as RM29,370.35 or RM1.11 per share only?

I went back to the records.

The answer was there.

When High & Low was “Malaysianised”, values in Pound Sterling had to be converted into Ringgit. Someone in the accountant’s office forgot to multiply the figure by 7.5, which was the exchange rate then.

But it meant a difference of RM1,652,573.65.

Peanuts to High & Low, but it was hell of a substantial oversight by any standard.

* * * * *



[1]           High & Low’s shares were traded in KL and London. It was one of the bluest of the blue chips of the day.
 
 

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