This year Christmas comes early for some ‘selected’ employees of Sime Darby. The Board of Directors (BOD) of Sime Darby will propose at the Extraordinary General Meeting (EGM) for the shareholders set on 8 November 2012 to approve a special ‘grant for selected employees’, which will be given in the form of free shares.
The proposed resolutions for the EGM is to approve BOD’s authority to issue the said grant to the only two employees nominated. The first one is President and Group CEO Dato’ Seri Mohd Bakke Mohd. Salleh, for the maximum amount of 3,000,000 shares in this grant scheme. The other is Nur Tania Yusof for 200,000 shares.
Tania is the daughter of BOD member Tan Sri Dr Yusof Basiron.
The EGM also proposed for a grant scheme to be approved, which will be categorized in three different groups:
The intention to promote productivity is noble. However the practice of plc giving away ‘free shares’ is very odd, considering the circumstance of modern reward schemes for working directors, senior management and employees who have been receiving handsome emoluments package which include salary, bonus, incentives and even other perks. Perks for some corporations include paid holidays and ‘retreats’.
The normal practice is to give Employee Share Option Scheme (ESOS) or ‘Trust Shares’, where employees and senior management are allocated shares and they have to take them up. The practice for ESOS would be a five-day average minus 10% discount. This goes for the ‘Trust Shares’ where the corporation will buy from the market for allocation with the same terms as the ESOS. Sometimes, the financing for these options is arranged.
These senior management and employees reward for the ESOS scheme will be realised in the future where they have to work hard for the productivity and performance of the corporation improved and they would make from the appreciation of the ESOS shares increased market value. Of course, the reward would also translate in the dividends paid, from the profitability.
In other plcs, CEOs have been given the option to take up rights issue.
Never the less, all of these schemes mean that the corporate individuals have to pay up for the holdings of the plc that they are serving. They have to own up for their holdings and there is no such thing as ‘free lunch’.
Why is Sime Darby BOD introducing these grant schemes, which include the liberty of BOD to determine which senior management or executives are entitled for these ‘free shares’ at the junction where the public demand for greater accountability?
The finer points have to be analyzed too. Bakke has only been in the service of Sime Darby for a little over two years. Three months earlier to the entrance of Bakke, Sime Darby BOD painfully admitted the scandals which plagued the plc, although these failed and scandalous projects have made Sime Darby as the laughing stock of the industry since two years before that. For the record, Sime Darby is a mainstay of Bumiputera investment via the ASNB scheme where almost 9 million Bumiputera unit trust holders have their lifesavings tied at.
This is a very generous scheme for Sime Darby Chairman Tun Musa Hitam and BOD to propose to the shareholders. Then again, Musa should be assuming responsibility for the Sime Darby cock-ups, which aggregated to over RM 1.7 billion. Assuming responsibility is to leave sometime back, instead of fast-forwarding on the rewards scheme for the CEO who has yet to prove himself.
Musa’s departure from Sime Darby BOD, along with some other really expired old hags would be a good ‘Thanksgiving’ item for this year. Apparently, Thanksgiving 2012 celebrations for the Americans is on 22 November.
*Updated Saturday 20 October 2012 0100hrs
This is the press release issued by Sime Darby Corporate Communications to all mainstream media. It was not send to the bloggers:
False and erroneous allegations made against the Chairman, Board of Directors and senior management of Sime Darby
Sime Darby is responding to certain allegations and accusations that have recently been posted on certain blogs with regard to a proposed long term incentive plan for eligible employees of the Group. The information contained in these blogs is wrong and thus the opinions posted are not founded on fact. The proposed performance-based employee share scheme is still subject to the approval of shareholders at general meeting. The two blogs and the comments posted have caused embarrassment to the Chairman, Board of Directors and the senior management of Sime Darby. The company takes a serious view of these baseless accusations and the inferences therein and will take appropriate action to protect the reputation of the organization. An official from Sime Darby has contacted one of the bloggers and informed him of his mistakes. Despite having notified him of his errors the previous day, he has yet to correct the offending post or remove it, which suggests that his intentions are malicious, vexatious and mischievous. The post has attracted undue attention and perpetuated his mistaken assumptions. A summary of the erroneous statements and the actual facts is listed below:
No. Accusations Actual Facts 1. EGM on 8 Nov to approve a special ‘grant for selected employees’ – in the form of free shares Sime Darby Bhd will hold an EGM on 8 November 2012 to seek approval for the performance-based employee share scheme – a scheme that aims to drive long term sustainable performance of the Group as well as to attract, retain and motivate employees based on their performance and the fulfillment of certain performance conditions and targets. The fulfillment of these targets will enhance total shareholders’ returns and the overall performance of the company which will benefit all stakeholders. 2. The reward is not to the 100,000 Sime Darby staff worldwide but only to two individuals. For employees working in Malaysia, executives of all grades including the executive director will be eligible to participate in the proposed scheme. For those employees based outside of Malaysia, executives of job grade VP II and above will be eligible to participate in the proposed scheme. 3. Only two employees have been nominated for the scheme, Dato’ Bakke for 3 million shares and Nur Tania Yusof for 200,000 shares Under the listing requirements, separate resolutions are required to be passed by shareholders to approve the grants of shares to Dato’ Bakke as the executive Director and Nur Tania being a person connected to a Director of Sime Darby Berhad. However all executives of VP II and above are eligible to participate in the scheme. It is wrong to suggest that these two individuals are the only two who will benefit from the proposed scheme. 4. The practise of giving away ‘free shares’ is very odd Sime Darby is not the first organization in Malaysia to implement such a performance-based share scheme. Other companies like Axiata, Bursa Malaysia and Maybank have implemented similar schemes earlier. 5. Why is Sime Darby’s Board of Directors at liberty to determine which senior management or employees are entitled for these ‘free shares’ at a time when the public is demanding for greater accountability? The scheme envisages the establishment of a Board committee to implement and administer the proposed scheme. This is standard practice in all organisations. It would be ludicrous to expect external parties to determine performance and rewards.Other facts
· In the case of the President and Chief Executive, the proposed performance-based employee share scheme allows for the granting of a maximum of 3 million shares over the 10-year scheme period. This number of shares will be vested on a staggered basis and only in the event of exceptional performance both at individual and enterprise level for the 10 years and subject to fulfillment of stringent performance-based conditions. The shares will only be vested in the grantee three years after the grant, subject to vesting conditions. These criteria will apply to all eligible grantees.
· The Board has built in safeguards into the process that will ensure that the interests of the company and its shareholders are at all times safeguarded.
The blogs posted on the performance-based employee share scheme are misinformed and reflect the lack of appreciation and understanding of industry practices on performance-based reward schemes.
For further information please refer to the Bursa Malaysia Website for Sime Darby’s circular to shareholders dated 16 October 2012 or contact:
Group Head, Communications & Corporate Affairs
Sime Darby Berhad
Tel: (603) 2698 7669
Fax: (603) 2698 0645
Never the less, the grant schemes proposed by the BOD for the shareholders to approve on the 8 November EGM is for the executives and senior management of Vice President grade and and up. None for the middle managers or lower grades.
Sime Darby is a primary investment for the masses via ASNB and PNB unit trust schemes. The ‘grant schemes’ proposal is not exactly for the majority within Sime Darby.
* Updated Saturday 20 October 1530hrs
Please read Datuk Rocky’s and Another Brick in the Voice’s take on the story. There are ‘clear and present danger’ from the perspective of political backlash to this Sime Darby’s move, especially at this point of time and the more recent issues which made the political climate heated up just days ago.
In our opinion, Sime Darby is taking this posting very seriously. And in our experience, the company and/or any of the personalities involved or aforementioned are considering to take the ‘appropriate action’ which probably include a legal action against the blog, blogger and commenters.
Please comment at your own risk and at our greater risk.