Transparency

Transparency is the cornerstone of corporate governance, and it is important to evaluate it over time in order to retain and ensure the companys confidence and trust. Although Permodalan Nasional Berhad (PNB) has encountered transparency in their governance framework with the annual report updating the company and its organizations performance, policies and facts, but some investors have accused the company is lack of transparency.

The problems emerged during the process of upgrading and updating the details and information in Permodalan Nasional Berhad (PNB)s funds. Investors blamed and linked Amanah Saham Bumiputeras (ASM) low return on the companys lack of transparency, which resulted in the funds lowest dividend payout in 2019 since its inception in 1990. Although Senior Minister of Economic Affairs Datuk Seri Mohamed Azmin Ali defended the low payout, some of the investors claimed that they were missing out of the information and they only received an annual report once a year instead of monthly updates from private funds, and it is because of the weaker economic climate. (Bernama, 2019; Bernama, 2020).

Regardless of the poor economic climate, the company is responsible to the investors demand for information accessibility as a right and interest in this fast-paced economy. The companys challenge is to increase the transparency of its corporate governance practices in order to maintain stakeholders trust and confidence.

Investment Stability

Investment stability is also one another challenges faced by Permodalan Nasional Berhad (PNB). According to Khairie (2017), the biggest fund manager in Malaysia forced though major consolidation and restructuring at companies to catapult PNB ahead. The firms being pushed were the investee companies, and it was a six-year strategic strategy. Permodalan Nasional Berhad (PNB)s chairman decided to boost the efficiency of stable firms. But, the low interest rate environment has limited the returns on fixed income assets in the investment. The changing investment market has reduced the investment return for PNB and other institutional investors. And there is a pandemic ravaged the global in coming few years.

Besides, according to Corporate News (2020), many firms are displaying sign of insolvency. The business of Permodalan Nasional Berhad (PNB) dynamics will be constantly evaluated, calculated and measured by them. PNB would invest in portfolio of assets rather than offshore firms or overseas companies. And there have been occasions where the companies and customers operation have been frozen, resulting in cash flow restrictions for both individual and businesses. People are said to be able to redeem and borrow money directly and immediately from the bankers. While some policies and plans are being implemented or revised, there still many companies are facing investment insecurity and suffering from the stability of their investment.

Directors remuneration:

The remuneration of directors is the cash reward or compensation given to directors in appreciation of their duty and responsibility. The Malaysian Code on Corporate Governance 2017 proposed that the best practices in remuneration charged to directors should be less than RM50,000 in order to prevent conflicts of interest between directors and minority shareholders. This lead to a serious concern because overpaying directors can manipulate minority shareholders equity in dividend payouts, resulting in a conflict of interest. And this may become one of the problems that Permodalan Nasional Berhad (PNB) would have to facing and concerning with.

According to Raj (2018), a recent attention has been on the high remuneration of some directors. The Malaysian Code of Corporate Governance proposes requiring the publication of salaries and disclosure of remuneration that paid to directors and senior management in order to improve board remuneration accountability and transparency. However, the majority of Government-linked Entities (GLE), such as Permodalan Nasional Berhad (PNB), do not report the remuneration that paid to directors and senior management publicly (Malaysia Kini, 2019). Moreover, according to The Star press in 2018, the average remuneration in Malaysias government-linked Entities (GLE) is overpaid, with the chief executive earning up to RM1.5 million in financial year of 2017.

Last but not least, as one of the Government-linked Entities (GLE), Permodalan Nasional Berhad (PNB) should report director remuneration as part of its corporate governance homework in order to preserve stakeholders trust. It is one of the companys obstacles in pursuing corporate governances accountability and transparency.

Changing Global Condition

A company having a good fundamental in practicing corporate governance is essential for a company to overcome any challenges. The chief executive of Permodalan Nasional Berhad (2019), Jalil Rasheed stated the company need to revitalize to withstand new challenges along the changing in macroeconomics condition, technologies, competitive dynamics and globalization. As to ensure how the company deal with the new challenges in this evolving market, the governance structure of the company is essential. The company should make sure that the corporate governance practice is capable with the changing global condition in order to maximize the interest of all the stakeholders.

The challenges of Permodalan Nasional Berhad potential face is the global economy is significantly more complex and interconnected. The market is getting more dynamic and fast-paced yet setting the governance system in stone will cause the company being left behind the path and losing it competitive strength. Permodalan Nasional Berhad announced earlier the strategic plan for 2020 to 2022 is to steer the organizations (Goh & Idris, 2020). The strategic plan is focus on diversity, value creation, risk management and organizational transformation as related to the changing global condition. While planning to steer the organization in the right pace, having good practices in the responsiveness and independence of the corporate governance is the task for the top management of Permodalan Nasional Berhad.

Changing in Economic Environment

Permodalan Nasional Berhad is facing another challenge which is the changes in economic environment. Based on a news written in 2020, PNB was not expected to make major changes to investment strategies Yusof (2020). This is because of the volatility of equity market and changes in oil prices. PNB remained the investments in the local market but the situation force PNB to increase the investments exposure in the international market. PNB would review expansion and asset allocation strategy to improve the economy.

Although there are changes in the economic environment, PNB had able to maintained a long-term perspective. This is because the investment approach is collective to make sure that it can generate long-term returns that can sustain for a longer period for its own unit holders. The chief executive officer of PNB stated that this is part of the continuous efforts to defend the investments in this economic environment. He added that strategic investments in leading corporates, global equities, private investments, and real estate are included in portfolio.

The expansion of investment portfolio from PNB in foreign equity market shows positive results therefore the chief executive officer informed that the performance of investments depends on the market performance. To provide sustainable returns in long term, PNB will continue to navigate the economic environment.

Use of Technology

The other challenge is the use of technology. According to Bernama (2018), corporate earnings in Malaysia reduced disappointedly. PNB President had informed that most of the corporate in Malaysia is facing big challenges that are within telecommunications, construction, and utilities because there is significant decline in the market capitalization. All the companies are encouraged to grow their revenue and optimize the costs to grow and expand because the areas of technology development become more efficient.

In order to promote the accelerated self-service and optimize the process, there is a need to focus more on technology to improve the process, employee, and workplace. According to PNB (2020), innovative micro investing mobile application known as Raiz was introduced. The mobile application can bring benefits to the public and allows customers to access into the app to do payments easily. The Chef Technology of PNB informed that the challenge of PNB is to connect customers to its own platform. The system of PNB is still running the mainframe. The other challenge of technology was building API framework that allow the connections between all banks which can make transactions easier.

Required to provide reasonable recommendations in facing or solving the challenges as mentioned above. At least 2 recommendation with elaboration per mentioned challenge.

SUBJECT: CORPORATE GOVERNANCE