Question 1 Ohanian Group Bhd.

In 2005, Roger Federer bought a controlling interest in Ohanian Group Bhd. (Ohanian), via an off-market
deal of 45.2 million shares (28.5%) at RM6.25 per share. Strangely, in breach of Bursa Malaysia’s Listing
Requirements, Roger Federer’s son Staniel Federer, aged 52 (current chairman and executive director of
Federer Brothers Malaysia) was appointed as an independent, non-executive director and had a huge say in
the management of Ohanian. Federer Brothers Malaysia is the supplier of raw materials to Ohanian.

Ohanian’s major owner at that time was its pioneer Chief Executive Officer, Serena Williams (21.67%).
Both Serena Williams and Venus Williams (13.93%) were the other large shareholders in the company.
They were responsible for the financial management of the company, though they were not accountants and
not registered members of the Malaysian Institute of Accountants. In 2008, Ohanian made RM38 million
profits on the back of RM289 million sales, improving by some 74% and 32% respectively from the
previous year.

Ohanian’s pre-tax profit surged 102% to RM62.4 million in the first six months ended 30 June 2010 from
the previous year’s corresponding period of RM30.9 million. On 28 April 2011, Ohanian appointed Caroline
Wozniacki, age 70 as the chairman. She boasted in securing businesses from the nation’s numerous ports
and brought about the development and success of the nation’s airports, especially the Kuala Lumpur
International Airport.

Directors shareholding:
● Caroline Wozniacki 100,000 (0.04%). She attended one of the six board meetings. She resigned as
chairman on September 2013;
● Serena Williams 7,710,000 (3.29%). She attended three of the six board meetings;
● Venus Williams 20,000 (0.01%). She attended three of the six board meetings;
● Li Na 530,000 (0.23%). She attended one of the six board meetings;
● Staniel Federer 50,000 (0.02%). He attended four of the six board meetings. He resigned as a director
on 6 January 2014.

In 2013, in contravention of Principle 2 of the Malaysian Code on Corporate Governance 2012 (MCCG
2012) on the annual assessment of the performance and contribution of the individual directors, the board of
directors of Ohanian (“board”) paid huge salaries and bonuses to their directors without providing rationale
for the salaries and bonuses given.

Besides Caroline Wozniacki, none of the other directors had any experience or knowledge on Ohanian’s
business. They also attended very few board meetings. None of the directors kept abreast with the company
business and hardly did any site visits to the ports or airports.

On 1 April 2013, the board was of the opinion that the Company was insolvent. During the financial year
2013, Ohanian recorded a loss before tax of RM270.6 million compared to RM121.2 million for the year
2012. The significant increase in the loss before tax was mainly attributed to the impairment loss on its
aircraft and related parts and equipment. No risk assessment was conducted.

On 23 February 2014, the board announced that Ohanian had been classified as a company under the
Practice Note 17 of the Main Market Listing Requirement (“PN17”) of Bursa Malaysia Securities Berhad.
The PN17 criteria was triggered as the shareholders’ equity of the Company on a consolidated basis as at 31
December 2013 is less than 25% of the Company’s issued and paid up-capital (excluding treasury shares)
and such shareholders’ equity is less than RM40 million.

Rafael Nadal was appointed as the new chairman and Chief Executive Officer (CEO) and he took over on
24 March 2014. He came with high credentials and held various positions in other public listed companies
and also private limited companies.

The Company‘s securities were suspended and delisted from trading on 3 March 2015 for failure to submit a
regularization plan by the deadline on 22 February 2015.
(Adapted from: MAICSA ICSA exam: Dec 2015)
Required:
a) Identify and justify 3 broad criteria or areas that could have been used to assess the performance and
contribution of the directors of Ohanian.

The 3 broad areas that could have been used to assess the performance and contribution of the directors
of Ohanian are director’s competency, commitment towards their role and their independence.

In terms of commitment, directors must be committed in discharging their duties and responsibilities. In
this case, the majority of Ohanian directors (4/5) only attended half or less than half of the number of
board meetings held. Furthermore, besides Caroline Wozniacki, the Chairman of the board of directors
who have experience and knowledge on Ohanian’s business operations, none of the other directors
bothered to keep informed of the company business nor did site visits to understand the Ohanian
business environment. This shows that Ohanian directors have commitment issues towards their roles
and responsibilities which signifies poor performance and contribution.

Next, in terms of competency, it is held that directors must possess the necessary skills, experience and
knowledge in discharging their duties and responsibilities. In this case, besides Caroline Wozniacki,
other directors do not possess the experience and knowledge about Ohanian’s business. Moreover,
despite Serena and Venus Williams not being accountants and not registered members of the Malaysian
Institute of Accountants, they are responsible for the preparation of financial statements of the company.
Due to the lack of knowledge, skills and expertise of Ohanian directors, they could make uninformed
decisions about the company’s business operations and harm the company’s business operations.

Finally, in terms of independence, it is held that directors must be independent and free from any
personal interest which may influence their business judgment. In this case, Staniel Federer, the son of
Roger Federer who is the major shareholder of Ohanian, is appointed as the independent non-executive
director of Ohanian and has major influence in the company management. Moreover, he is also the
chairman and executive director of Federer Brothers Malaysia who supply raw materials to Ohanian. As
Staniel Federer holds the director position in both of the companies, there is a high possibility that he
might make a business decision in favor of his personal interest and conflict with the company’s interest.
Therefore, the conflict of interest will impair his objective and independent judgment and fail to
discharge his duties and responsibility as an independent non-executive director. For example, he might
make poor business decisions which are detrimental to Ohanian while benefiting Federer Brothers
Malaysia.

b) Does Staniel Federer qualify as an independent director under Bursa Malaysia’s Listing Requirements?
Provide 3 justifications for your answer.

Independent Director acts as a guide, coach, and mentor to the Company. The role includes improving
corporate credibility and governance standards by helping in managing risk. He or she does not have any
kind of relationship with the company that may affect the independence of his/ her judgment).para 1.01
BMLR

Staniel Federer does not qualify as an independent director.

First, Staniel Federer is an executive director of Federer Brothers Malaysia. Since Federer Brothers
Malaysia is the raw supplier of Ohanian, and it is operated by the Federer’s Family. Hence, Staniel
Federer has the possibility to make decisions for his own or Federer Brothers Malaysia’s interest.

Second, Staniel Federer is the son of Roger Federer, the major shareholder of Ohanian. It should not
have a direct or indirect relationship between both executive director and independent director.

Third, Staniel Federer had a huge say in the management of Ohanian. As he involved in executive
decision.
c) Comment on the board leadership structure of Ohanian and advise Ohanian on how it can embrace good
corporate governance practices.

1. The number of independent directors, MCGG Practice 5.2 provides all companies with at least half.
2. BMLR Para 15.02, at least 2 directors or ⅓ should be independent directors.
3. MCGG Practice 1.3 provides that CEO and Chairman should be separated to avoid the concentration
of power. (Explanation from Guidance 1.3)

2)Discuss the concept of an ideal Board of Directors in terms of board composition with the reference of
MCCG 2021 and BMLR.

The composition of the board has an impact on the board's ability to carry out its oversight responsibilities.
An effective board should consist of the right people, with the right mix of skills, knowledge, experience,
and independent elements that are relevant to the company's objectives and strategic goals. The proper
board composition will ensure enough diversity and independence to avoid 'groupthink' or 'blind spots' in
decision-making. It also enables the board to be better prepared to respond to potential challenges and
deliver value.

The Nomination Committee should ensure that the board's composition is refreshed on a regular basis. The
Nomination Committee should review each director's tenure, and annual re-election of a director should be
contingent on a satisfactory evaluation of the director's performance and contribution to the board. At least
half of the board comprises independent directors. For Large Companies, the board comprises a majority of
independent directors. The tenure of an independent director does not exceed a term limit of nine years.
Upon completion of the nine years, an independent director may continue to serve on the board as a non-
independent director. If the board intends to retain an independent director beyond nine years, it should
provide justification and seek annual shareholders’ approval through a two-tier voting process.

Appointment of board and senior management are based on objective criteria, merit and with due regard
for diversity in skills, experience, age, cultural background and gender. The directors who are appointed
must be able to devote the necessary time to effectively serve on the board. A director's existing board
positions, including those on boards of non-public companies, should be considered by the board. Any
appointment that may cast doubt on the integrity and governance of the company should be avoided.

3) Analyze the rationale behind the statement below:- “The tenure of an independent director does not
exceed a cumulative term limit of nine years.” Practice 5.3, MCCG 2021.

In considering independence, it is necessary to focus not only on whether a director’s background and
current activities qualify him or her as independent but also whether the director can act independently of
management.

Stakeholders are increasingly concerned about the potential negative impact that directors’ long tenure
may have on their independence. The long tenures of independent directors and familiarity may erode the
board’s objectivity.

Due to long or close relationships with the board and management, an independent director may be too
sympathetic to their interests or too accepting of their work. There could also be occasions where an
independent director may become a ‘dependent’ director due to prolonged insular recruitment processes
and attractive remuneration packages and material benefits.
4) Illustrate how boardroom diversity could play a key role in the effectiveness of a company’s board.

MCGG Practice 5.5 stated appointment of board and senior management are based on objective criteria,
merit and with due regard for diversity in skills, experience, age, cultural background and gender as these
criterias can offer depth compared to a non-diverse board. And also led to better decision making.

In addition, the appointment and re-appointment of directors is a critical aspect of corporate governance,
which has an impact on the leadership of companies. With these criteria, company boards are composed
from various backgrounds and experiences in order to meet the demand and expectations of the roles.

5) Is Boardroom Gender Diversity essential to ensure sound corporate governance in an organization.

According to the MCGG Practice 5.9, it is essential for all boards to comprise at least 30% women
directors. Numerous studies have proven the business case for board diversity, in particular the
participation of women on boards. The board should also review the participation of women in senior
management to ensure there is a healthy talent pipeline.

Furthermore, gender diversity is an important factor in boards because it can contribute to the functioning
of boards which could potentially positively influence corporate performance. The participation of women
in decision-making positions should not be focused on board positions alone but should be broadened to
include members of senior management as the same benefits apply. Thus, the board should establish
gender diversity policies to support the participation of women on the board as well as senior
management.