SIME DARBY: A Conglomerate Gone Awry
By Tunku Abdul Aziz
There is a place for conglomerates in the business world. However, as with everything else, some are good, but mostly they invariably become unwieldy and difficult to manage effectively. Many come unstuck, leaving behind a trail of miserable examples of management failures, human greed and frailties. As always, there is a lot of cleaning up to do after the party is over.
The sad truth is that we do not as yet have what it takes to run a complex business successfully, and a conglomerate is hellishly difficult to keep on a straight course because the temptation to wander off into the unfamiliar is often irresistible, and most conglomerates find themselves up a creek.
There have been many instances of major failures in the Sime stables. There was the case of the insurance business in the UK in the eighties, a member of Lloyds, which was in such a bad shape because of mismanagement that it had to be bundled with a very profitable money broking company into an attractive package and sold for a song. Sime Darby naturally had to be responsible for all the liabilities resulting from claims on policies transacted up to the time of the sale of the company. For the next several years after the sale of the company to the new owners, Sime Darby continued to send out to the UK enormous sums of money to cover the claims.
Then there was the Sime Bank debacle. Banking was a business in which it had no expertise and had to rely on the management that came along with the bank when it was acquired. The integrity of the many of the top executives running Sime Bank was questionable. What happened to the bank should have been a lesson to the board of Sime Darby about sticking to what it was good at. I well remember in Windsor, England, saying jocularly to Tunku Tan Sri Ahmad Yahaya, then Group Chief Executive, when he told me Sime Darby had acquired a bank that he would be better off getting a casino licence. Later he admitted that I was right.
I also recall the factory ship fiasco in the early eighties. The Sime Darby-owned vessel operating in the North Atlantic off the coast of Africa found itself in rough seas financially. Sime Darby decided to sack its two British employees claiming that they had got into this business with the approval of the board in Kuala Lumpur. This was patently untrue. The Brits would not be bullied into submission, and they sued Sime Darby and its Chairman, then Tun Tan Siew Sin, for wrongful dismissal, and won a very substantial sum of money in an out of court settlement. Zubir, the dismissed Group Chief Executive should not have allowed the board of Sime Darby to treat him so shabbily.
