Management Dilemma 001

Case study:

XYZ Sdn Bhd is a private incorporated company limited by shares. It is a wholly owned by a foreign company and is in the business of manufacturing fasteners to cater for oil and gas industries. It operates in Malaysia and employs locals as well as foreign labourers. XYZ Sdn Bhd is helmed by a Japanese MD and a GM. THE GM is also a japanese expatriate.

Mr. Sharom is the Assistant General Manager and reports directly to the GM.

Ms Teoh who handles the payroll and human resource division reports directly to the japanese MD.

One day, some of the foreign employees gathered up and met Mr. Sharom. They asked him to help them to solve their problem related to deduction of employment levy which is still being deducted from each of their payroll. The employees told him that levy is borne by employer and no more deducted from salary.

The employees already brought this issue to Ms. Teoh but to no avail. Ms Teoh refuses to adhere to their request and toned up against them.

Now, out of no choice they went to get help from Mr Sharom.

What should Mr. Sharom do?🙂

VIJAYA DEVAN'S SOLUTION:

This is an issue concerning legal risk, reputation risk, integrity and compliance.

Let's look at the legal risk perspective first.

Malaysia's jurisdiction that applies to this issue is that of foreign employee's labour law which falls under Act 265 - the Employment Act 1955. 

Since January 2018, the relevant act had been reviewed.

No employer has the right to continue deduct foreign employees levy from employees salary. The act referred to section 19 further went on to stipulate that the levies shall be borne by employers and not the employees.

So, based on this, XYZ Sdn Bhd had committed an offence punishable by courts of law. The action of deliberately committing an offence with knowledge of current preventive rule is tantamount to committing a corrupt practice and it breaches the Malaysian Anti-Corruption Commission Act 2009 (MACC Act 2009).

The event will be a great damage to the image and reputation of the business on one hand and to the stewardship of the business on the other. This also will not bode well among the grassroot employees, whether or not they are foreigners or locals.

This bad incident will further create a bad reputation to customers in particular and stakeholders in general. However, the most reputation damage effect will be felt by shareholders. Possibilty of shareholder pullover or customers distancing from engaging XYZ Sdn Bhd's service is inevitable.

From the perspective of integrity, obviously it is lagging. Here, the japanese MD and GM should take responsibility for failing in providing oversight duties as a 'reasonable man' in same capacity would have done. Denial from them is intolerable.

From the perspective of compliance, it's a definite none existing case. I suggest that the MD should  set up a governance and compliance committee to be the oversight arm of the organization. This oversight body will conduct robust surveillance on all risks and thereafter put the organization on solid foot.