A government-linked company (GLC) is a company that is owned or controlled by the government or a government agency. GLCs are usually established to manage and invest public funds, such as pension funds, sovereign wealth funds, and other public assets. They may also invest in private companies and other assets to generate returns for the government¹.
Making a GLC profitable can be challenging, as GLCs often face political interference, bureaucratic inefficiency, lack of transparency, and social obligations that may compromise their financial performance. However, there are some strategies that can help improve the profitability of a GLC, such as:
- Aligning the GLC’s objectives with the government’s goals and priorities. This can help ensure that the GLC has a clear mandate and direction, and that it receives adequate support and resources from the government. It can also help avoid conflicts of interest and duplication of efforts with other government entities².
- Adopting good corporate governance practices. This can help enhance the accountability, transparency, and professionalism of the GLC’s management and board. It can also help attract and retain qualified and talented staff, as well as improve the trust and confidence of the stakeholders, such as the government, the public, and the investors².
- Implementing environmental, social, and governance (ESG) principles. This can help create value for the GLC by improving its reputation, reducing its risks, increasing its efficiency, and fostering its innovation. ESG principles can also help the GLC contribute to the sustainable development of the society and the environment³.
- Diversifying the GLC’s portfolio of investments. This can help reduce the exposure and dependence of the GLC on a single sector or market, and increase its opportunities for growth and returns. Diversification can also help the GLC balance its short-term and long-term objectives, as well as its financial and non-financial goals².
- Engaging proactively and regularly with the government. This can help the GLC communicate its achievements, challenges, and needs to the government, and seek its feedback and guidance. It can also help the GLC influence the government’s policies and regulations that affect its industry and operations².
Source:
01/09/2023
(1) Government Link Investment Companies In Malaysia 2023. https://blogmalaysia.com/government-link-investment-companies-in-malaysia/.
(2) How business interacts with government: McKinsey … – McKinsey & Company. https://www.mckinsey.com/industries/public-sector/our-insights/how-business-interacts-with-government-mckinsey-global-survey-results.
(3) Five ways that ESG creates value – McKinsey & Company. https://www.mckinsey.com/~/media/McKinsey/Business%20Functions/Strategy%20and%20Corporate%20Finance/Our%20Insights/Five%20ways%20that%20ESG%20creates%20value/Five-ways-that-ESG-creates-value.ashx.
Dr Joseph Lee 