5.1. Politics, Critical Junctures, and Governance
This paper traced the trajectory of Bumiputera affirmative policy that shaped board representation and ownership structures in Malaysia using historical institutionalism as a lens. In this regard, we explored three interrelated questions: (1) What critical junctures shaped postcolonial ethnic-politics and, in turn, affected equity ownership representation on corporate boards of directors? (2) How did these critical junctures become path-dependent in reproducing ownership and board structures? (3) What counterfactuals and contingencies were present in relation to these changes?
We examined the role of a series of critical junctures: (i) the rejection of British administrators’ proposals for a Union policy; (ii) independence in 1957; (iii) the ethnic clash of 1969; (iv) the 1997/1998 Asian economic crisis and its implication for post-crisis policies; and (v) the 2010 NEM, which affected Bumiputera interest and governance reform, in particular, ownership and board structures. These events also manifested as critical junctures with enough contingencies and counterfactuals reinforcing Bumiputera as a significant path-dependent institution.
Bumiputera also manifested as a political agenda that challenged colonial rule and values, which undermined native Malays’ place in the economy and in society. The Malays perceived they had an ‘unfair’ social status, especially due to the colonial polity, with non-Malays dominating corporate boards and equity ownership. The series of critical junctures that gradually and subtly helped establish the Bumiputera as an alternative affirmative policy challenged the colonial polity, although power and politics played a crucial role in the transformation. This institutional change questioned the ‘taken-for-granted’ version of colonial polity and ushered in governance reform affecting corporate ownership and representation on boards of directors in Malaysia. This insight is an important contribution to embryonic, critical research on governance, especially in emerging countries (see Bédard & Gendron, 2010; Uddin & Choudhury, 2008; Yonekura et al., 2012; Hopper et al., 2017; Siddiqui & Uddin, 2016).
5.2. Ethnicity as a Vehicle for Temporal Processes in Governance
An important question scholars in critical junctures have addressed concerns the ‘change-permitting’ character in historical processes of gradual and subtle transformation. Our historical analysis of corporate governance reform in Malaysia suggests that ethnicity allowed willful actors to organize themselves and argue for a change in colonial polity that undermined native Malays and their Sultan-based governing traditions. The willful actors had an ideological basis to act on and convince others of their political project. It became a profoundly sustainable political project because actors were ideologically convinced, and the underlying ideology was strategically mobilized. The basis is the ethnic element – the change-permitting character – that characterizes an endogenous force for gradual transformation rather than an exogenous force prompting dramatic change (Mahoney & Thelen, 2010).
That said, in the reform of corporate governance in Malaysia, ethnicity acted as an endogenous force as opposed to an exogenous shift that the colonial rulers imposed on the economy and society. Our analysis reveals that grievances, which were salient as Malays were socially, politically, and economically disadvantaged, stimulated a ‘change-permitting’ property and developed a path-dependent process that affected ownership and board structures. This was possible because the grievances were ideologically rooted in ethnicity and the resultant repercussions created a discursive space for governance reform. Such a possibility is not new in historical institutional analysis. When exploring how institutional change can occur, some scholars have examined how actors affect power balances by engaging in multiple institutions (see Knight, 1992; Thelen, 1999). In our case, political and economic institutions shaped Bumiputera engagement in ethnic and cultural institutions. The Malays’ grievances played a socio-political role in organizing this multiple engagement, hence the influence of critical junctures.
These contextual ramifications also show how power mechanisms work. Before independence, Chinese-Malays were gradually acquiring economic power while creating a form of competition for postcolonial economic prosperity. Our analysis suggests that critical junctures are inherently competitive in that one group of actors becomes powerful by mobilizing their institutional preferences, but this involves arguments and debates with competing groups of actors. This competition was historically significant and affected the series of critical junctures (discussed in Section 4). The Chinese were economically privileged while Malays were under-privileged and had less economic and political power. Consequently, willful actors (i.e. Malays) became much more cautious, and competition between the two ethnic groups became institutionalized. As Schickler (2001) and Palier (2005) observed, institutions are fraught with tensions because they are confronted with resource considerations and distributional consequences. Compromises are thus difficult, but ethnicity was a powerful guiding rule for dominant actors facing ambiguities (Moe, 2005). Hence, for critical junctures to challenge prevailing institutions and offer alternatives, conflicts and contradictions are important institutional conditions.
Above all, the Malays desired to become dominant and powerful. Although desire is a psychological property that can organize an institutional preference, it is also a defining principle for forming the subjectivity that leads to an endogenous force against exogenous forces (Slater, 2010). This desire served as a ‘change-permitting’ property in all the critical junctures we analyzed in Section 4. As the analysis suggests, such a desire has been a defining principle for all temporal processes of critical junctures and affected governance reforms considerably by giving the Bumiputera power in the form of a larger share of corporate equity ownership and representation on corporate boards of directors. Hence, ethnic politics has been an inevitable, endogenous force affecting governance reforms in Malaysia (c.f. Davie, 2005; Efferin & Hopper, 2007; Kim, 2008; Wickramasinghe & Hopper, 2005).
