The Pakistan Tehreek-e-Insaf has bragged about its technocratic duo of Jahangir Tareen and Asad Umar as competent managers with private sector experience who are ready to lead the economy. Yet, new information about corporate governance practices at JDW Sugar, where Tareen is CEO, are beginning to cast doubts over that image of competence on at least one half of that duo.
The Express Tribune has learnt that Tareen has often used company property – especially the corporate jet – for personal and political campaigning purposes, and managed to escape fiduciary scrutiny by appointing figureheads, including some of his own personal household staff, as members of the board of directors of the company.
JDW Sugar Mills is the largest and most profitable sugar manufacturer in the country, and is a publicly listed company, with shares traded on the Karachi Stock Exchange. For the financial year ending September 30, 2011, the company had gross revenues of nearly Rs26.5 billion and a net income of Rs1.3 billion.
Tareen’s political opponents in the Pakistan Muslim League-Nawaz, however, allege that the billionaire businessman-turned-politician has been using the corporate jet for political purposes, flying fellow members of the PTI around the country at the expense of a company in which Tareen and his son own only a combined 42.1%, with the remainder owned by institutional investors and the general public.
When contacted for comment, Tareen denied that the jet was ever used for political purposes, though he did say that he occasionally uses the plane for personal purposes and reimburses the company every six months. He went on to claim that his previous payment to the company for the use of the plane came to Rs15 million. Regardless of whether the plane was used for political purposes, the more serious allegations against Tareen’s management of JDW Sugar is that he has packed the board of directors with personal employees, including some people who do not have the educational or technical qualifications or experience to be able to execute their fiduciary responsibilities to the company’s other shareholders.
A company’s board of directors is meant to regulate the behaviour of its executives. As the largest shareholder, Tareen does have the right to pick the largest number of board members, but he seems to have gone out of his way to pick people who would not ask too many questions on behalf of the minority shareholders.
For instance, a man named Abdul Ghaffar is listed on the board of directors for financial year 2010. He appears to have only a primary school education and serves as a waiter in Tareen’s personal residence in Lahore. When contacted for comment, Abdul Ghaffar said he had no knowledge of owning any shares in the company, let alone attending the 10 board meetings that company records say he did as a member of the board.
Tareen points out that Ghaffar is no longer on the board of directors, but the list for 2011 and 2012 includes the name Muhammad Ismail, who is reportedly a cook in the Tareen personal residence in Lahore. Incidentally, Muhammad Ismail is also listed as a member of the board’s audit committee, which is supposed to scrutinise its financial records.
The JDW Sugar board of directors has eight members. Two are Tareen and his wife. Two others are Tareen’s brother-in-law, Makhdoom Ahmad Mahmood and his wife. Ahmad Mahmood is the second biggest shareholder in JDW Sugar, owning about 19.4% of the company. He is also the chairman of the board.
The other four board members are supposed to represent the minority shareholders in the company, but since none of the other shareholders has more than a 10% share in the company, they do not have the right to nominate directors. As a result, the other four directors are all either personal employees of Tareen, or in the case of Ijaz Ahmed Phulpoto, an old personal friend.
Sources familiar with the matter told The Express Tribune that Ahmed Mahmood, once considered Tareen’s political mentor, has had a falling out with his brother-in-law over differences on how to run the company. Mahmood backed Tareen twice for a seat in the National Assembly from his home constituency in Rahimyar Khan, which some believe Tareen could not have won without Mahmood’s blessing.
Mahmood was reportedly suing Tareen over several of these issues, but the two reportedly reached an amicable settlement earlier this year brokered by mutual friends and financial institutions with stakes in the company, as a result of which Abdul Ghaffar was kicked off the board of directors and replaced by Mahmood’s wife. Mahmood also appears to be getting considerably more compensation as chairman of the board than he was the year before. Nonetheless, Tareen’s appointees still dominate the board of directors.
Published in The Express Tribune, November 23rd, 2012.