PETRONAS Board Excellence : Essentials For Directorship

Tuesday, 15 November 2016
Shangri-La Hotel, Putrajaya

Bismillahirrahmanirrahim

Assalamualikum wa Rahmatullahi wa Barakatuh

Salam Sejahtera dan Salam 1Malaysia

Datuk John Zinkin,

Dato’ Richard Azlan Abas,

Members of the Boards of PETRONAS Group of Companies,

Welcome to this foundational PETRONAS Board Excellence program which is jointly designed and developed by Group Secretarial & Board Governance, PLC and Malaysian Directors Academy (MINDA). I am delighted to see each one of you making the time to be here today as you continuously invest in your development, so that, as Directors, you are able to shoulder the amanah given more effectively.

Ladies and Gentlemen,

2. Last Tuesday, November the 8th, Americans elected Donald Trump to be the next President of the United States. Almost everybody – the pundits, the media, the political observers – have not predicted a Trump win.

3. With his campaign of “Making America Great Again”, it will be interesting to see how this impacts us at PETRONAS, as well as Malaysia. The Trans-Pacific Partnership Agreement (TPPA) and USD-Ringgit foreign exchange are amongst others that could be affected. The Ringgit is already in the region of 4.40 per US Dollar.

4. In navigating through these uncertainties of the world’s geopolitics as well as adjusting to the “new norm” of the oil and gas industry, Directors of Boards have a crucial role. What can we do to equip our Directors with the essentials so that they can provide the stewardship and drive in this fast-paced and ever changing environment, for our Group of Companies to emerge ahead of the curve.

Ladies and Gentlemen,

5. Given the increased expectations for more “effective Boards”, it is very important for Directors to be on a continuous learning journey. The PETRONAS Board of Directors Development Series will focus on four key development areas, namely: Board Effectiveness, Regulation and Outside Scrutiny, Oversight of Risk Taking, and Strategy and Growth. Within these areas, it will address governance, performance, strategy, non-financial metrics, risk, top management succession planning, regulatory landscape and reputation, among others. We strongly believe that this development series is an investment in our current and future leaders. An investment that we must not compromise on, even in most challenging of times. This will definitely ensure that succession planning and the sustainability of a strong leadership pipeline is preserved.

6. These series consist of two types of programmes. The first is Foundational programme which includes today’s and tomorrow’s sessions. It is developed especially for newly-appointed Directors or for the seasoned, as refresher, to sharpen and strengthen necessary skills in Legal, Governance and Policies, Financial Literacy, Roles & Responsibilities, and Ethics.

7. The second type of programmes are Advanced programmes. This will comprise topics such as Best Practices on Board Effectiveness, Stakeholder Management, Innovations, Sustainability, CSR and Groups’ specific needs such as those of Audit and Remuneration Committees.
Ladies and Gentlemen,

8. As Chairman of MDEC, I visited Silicon Valley two weeks ago. In my mind, beyond anything else, Silicon Valley is more about mindset. One that we could learn. It is a mindset that empowers and have a big enthusiasm for openness to collaborate and connect – be it ideas, services or products. They also do not try to do everything themselves. They optimise their resources efficiently!

9. At General Electric (GE) Digital, CEO Bill Ruh stressed that the first step GE took in order to remain innovative and ahead of the curve was to shed away the arrogance of their industrial success. Indeed, they embraced new ethos that they do not know everything! With this kind of mindset, it has enabled GE to connect and learn from others. Including from their competitors. To them, they are learning from those who have better ideas, knowledge and experience – a view from different perspectives. A view that could have been in the blind spots all these while. GE collectively understand that the days that they know best are over.

10. With a workforce of more than 333,000 spanning more than 170 countries, it is no wonder that GE is ranked 26th in this year’s Global Fortune 500. It is because they have innovatively transformed themselves beyond just an OEM! And they have continuously done so from the days of their founder, Thomas Edison.

11. As Directors, this is a very powerful lesson which we must take on board. We must, from the top, set the right tone to promote and practice the spirit of continuous learning, openness, collaboration and partnership.

12. In fact, given the size of our Group of Companies, there are tremendous opportunities for us to leverage on each other’s strengths. The openness will allow us to go beyond our respective OPUs. Beyond Downstream or Upstream or PD&T businesses. Maybe, we can learn as well from other Companies. Even our Competitors.

Ladies and Gentlemen,

13. The pace and speed of companies in Silicon Valley developing their disruptive entrepreneurs and companies that will unsettle the brick and mortar companies is alarming. Be it Draper University, Plug and Play or Boot Up World, they have the mental make-up of wanting to push faster, better and newer way of solving problems through series of start up companies. If we are not able to have the foresight of these disruptive innovation, we will not even realise when the disruptive trains hit us!

14. KPMG’s September 2015 Global Boardroom Insights reported that “53% of directors say their board’s involvement in the formulation and consideration of strategic alternatives have increased in the past 2 to 3 years”. This gives a clear indication where Board of Directors can and should act as a Company’s disruption antennae. Our Boards must go beyond only ‘reviewing and concurring’.

15. It is in this context that I highly encourage you in your respective areas and Boards to voice out ideas and opinions. Innovation can only flourish if we actively encourage curiosities, questions and debates. This is where we live by hierarchy of ideas, and not on hierarchy of positions.

16. I also firmly believe that an effective Board is one that consistently arrives at an informed decision, after open and candid discussions that leverage on the diversity of its members. Where members have timely access to relevant information that could influence and impact their views on the decisions to be made. And where members recognise their responsibility as Board Members.

Ladies and Gentlemen,

17. Since its inception in 1974, PETRONAS has grown to be the only Global Fortune 500 Company in Malaysia. This was made possible by our founding fathers who had far sighted visions and wisdom, shouldering very deliberate and careful planning as well as fierce focused implementation. That had pushed our Company from only a domestic regulator to a respectable global oil and gas company. These have been achieved through a lot of sacrifices, and hard work from everybody within PETRONAS all these years.

18. We must also recognise the operational freedom given to us by our Shareholder, for us to excel. To be successful. To be where we are today.

19. I need to constantly remind us all of this. To remember where we come from. The raison d’etre for our establishment. With the provisions enshrined in the Petroleum Development Act, we were incorporated as the National Oil Company with one Shareholder, the Government of Malaysia. We are committed to our Vision and Mission, guided by our Shared Values. I strongly believe given the challenges we face, we are on the right path where we are reshaping ourselves through the PETRONAS Cultural Beliefs.

20. I recalled what Toto Wolf shared during a luncheon talk we had with him. He pointed out why MERCEDES AMG PETRONAS Formula One Team have been winning the Formula One World’s Constructors’ Championship title 2 times in a row at that time. The 3rd title was won a week later in Japan. Marvelous achievements! The simple reason is that he and his team are always focused on the next race and disregards his team’s list of accolades. He is very focused on what or how else can be improved. More importantly, he believes that success can breed complacency. To him, the team must remain agile, highly competitive, constantly adapting, looking for new advantages. They continuously learn to be better. Immediately after each race!

21. Programs such as today and tomorrow are testaments for us to continuously be relevant.

Ladies and Gentlemen,

22. I hope you all will have a constructive discussion in this programme. The session provides a safe environment for each one of us to continuously build on the existing relationships and learn from each other. So grab these golden opportunities. Exchange ideas. Listen to one another. That is the power of networking!

23. In the spirit of ‘Tell Me’, I urge you to actively seek and give feedback on the programme for continuous improvement. Help them to help all of us to receive the best learning experience.

24. As Directors, we need to lead by example and propagate what we have endorsed and approved at every opportunity we get. Our actions today will go a long way. They have the power to shape our Organisation. Our people. For years to come.

25. It is my sincere hope that you leverage as much as possible in all the learning platforms provided so that we can deliver on the great amanah as a board member to the best of our ability. Let’s ‘Own It’ together and I am confident we will have ‘Shared Success’. Ensuring our Company remains relevant in the future. And for future generations of our Country.

Thank you.