Control over decision-making in eight major oil palm plantation companies in Malaysia

Abstract

Southeast Asia's mosaics of agricultural and tropical forest landscapes have been significantly shaped by the advance of industrial plantations from colonial times to the present. Controversies over deforestation and oil palm sustainability have emerged in this context. Significant land use changes have been made by industrial plantation companies, which have diversified their activities to sectors ranging from automobiles to banking and telecoms to become corporate giants.
 The solutions proposed today to curb deforestation for oil palm plantations consist of sectoral market tools such as trade bans, regulations or certification schemes that are supposed to influence the economic decisions of private companies. However, oil palm corporations are so diversified and deeply embedded in national economies that many other factors could influence their corporate decision-making. Studies since Porter and Laporta suggest that the structure of the financial network of company shareholders may have more influence on corporate decisions than the market itself, in other words that the nature of company ownership (government versus private sector) is the essential driver in corporate decision-making.
 This thesis explores how these structural drivers play out in major oil palm corporations. Using network analysis, we quantified and analysed shareholdings in the main oil palm corporations in Malaysia. We gathered data on 4,331 shareholdings at ten different levels. The study describes the financial topologies and compares them with the nature of company ownership and with measurable decision-making processes, such as structural control and decision loads.
 We found that decision-making was not influenced by the nature of ownership but was very much influenced by the financial structure of the corporations. We also found that decision loads and structural control seem to predict a structural flexibility which is intrinsic to these corporations.
 The implications of these findings could help to rethink the political governance of deforestation and open up a new field of research concerned with describing and analysing the deep financial structures that govern the behaviour of corporations. Firstly, understanding the financial forces that shape plantation companies is critical to oil palm and forest sustainability. Secondly, we can now identify and prioritize the most resilient corporations with a view to developing sustainable practices for the long term.