Replacing Army Generals with Professional Civilian Leadership Revived the Loss-Making Military Businesses
In 2020, the Fauji Foundation appointed Waqar Ahmed Malik as its first civilian CEO and Managing Director, marking a significant shift from its traditional military leadership. Malik, with a career spanning over 28 years with Fortune 500 companies, brought extensive corporate experience to the organization.
How Waqar Malik got hired?
Politics and government were not only thing, scientist bajwa was experimenting with, the idea of a corporate professional coming in to fix the problem had been on his mind for some time, he just had to wait to secure his extension first.
In 2019, Bajwa was expecting a three year extension from the freshly formed government of Imran Khan. After some legal technicalities, the extension came in by the end of 2019. In April 2020, just a couple of months after the extension was confirmed, Mr Malik was appointed CEO and MD of the Fauji Foundation.
Impressed by Malik's presentation and recognizing the Foundation's declining performance, General Bajwa found Imran Khan for Fauji foundation to revitalize its operations. Although Malik was hired on merit, his connections to Bajwa’s family likely reinforced trust in his capabilities. Malik had a professional history with Matin Amjad, a former colleague and the brother-in-law of General Bajwa. This connection deepened through their shared ventures, such as PakOxygen, where Malik served as board chair and Amjad as CEO.
While he had the trust of General Bajwa, others in the military brass and in particular those on the Committee of Administration felt slighted. On top of this, officers began to worry about how this would affect their retirement plans, since the Fauji Foundation also provides employment to a number of retired officers.
Cleaning the businesses infested with Army personnels
At the time that he took over, many of these companies were staffed with retired army personnel. When Malik was made the Chairman, he started off by trying to bring in people with experience in the corporate world. Positions which were seen to be held for retiring army generals were now being given to business oriented people who had experience in running successful organisations.
CEO positions of subsidiaries were filled by Mr Malik as per his comfort. People like Zaheer Ahmed, Sarfaraz Rehman, Qamar Manzoor, Atif Bokhari and Faheem Haider were brought in.
Background of Fauji Foundation
The story of the Fauji Foundation actually starts with a sum of $5 million left by the British in 1945 for the Indian veterans of the second world war.
The money was left in the Post War Services Reconstruction Fund (PWSRF) for Indian War Veterans, which remained unused and was divided between India and Pakistan in 1947 at the time of partition. The civilian administration transferred control of this still unused money to the Pakistan Army in 1954.
At the time, Pakistan’s share was around Rs 1.82 crore. Instead of distributing this remaining money, the army invested it in setting up a textile mill. Why would the army do this? Because there are essentially two kinds of charitable organisations. The first kind are the ones which for the most part collect donations and funds and spend those directly on charitable endeavours. They rely on a constant stream of donations. The second type is a little more complicated. These are organisations that operate as profitable entities. They undertake business and use the profits from these businesses to engage in charitable activities.
Fauji Foundation, set up under the Endowments Act of 1870, is the latter kind of organisation. Using that initial Rs 1.82 crore, the foundation has grown into a massive conglomerate that looks after the needs of retired servicemen and their families. For example, with the money they made from that first textile mill, the Fauji Foundation set up the first 50-bed tuberculosis hospital in Rawalpindi.
It is an entirely self-sustaining entity. Over time, the business interests of the Fauji Foundation have expanded including ventures in the fertiliser, banking, food, energy, and cement industries. Almost since the inception of Pakistan, the Fauji Foundation has been a point of pride for the armed forces and has been run by them. Which is why when Waqar Malik showed up, there was a sense of apprehension within the conglomerate.
Why was Waqar Malik not given extension?
According to this former officer, the reason Waqar Malik was not given another extension was the impression that he was appointed by General Bajwa. The new military leadership wanted to have their own people leading the Fauji Foundation. And while this might be true, our source also says it will be difficult to justify removing those CEOs and their staff that have proven to be successful. Now it will all be a question of what approach the new CEO takes.
Result of appointing Meant/Fit-for-Job on businesses:
Fauji Foods
- CEO Transition: Lt Gen Javed Iqbal → Usman Zaheer Ahmad (2020).
- Performance Comparison (4 Years Pre- and Post-2020):
- Losses reduced from Rs 12 billion (Rs 3 billion/year) to Rs 6 billion (Rs 1.5 billion/year).
- FrieslandCampina Engro: Profits remained steady at Rs 6 billion (Rs 1.5 billion/year).
Fauji Fertilizer
- CEO Transition: Lt Gen Tariq Khan → Sarfaraz Ahmed Rehman (2020).
- Performance Comparison (4 Years Pre- and Post-2020):
- Profits increased from Rs 54 billion (Rs 13.5 billion/year) to Rs 92 billion (Rs 23 billion/year).
- Engro Fertilizer: Profits rose from Rs 54 billion to Rs 81 billion.
- Share Price and Returns:
- Share price increased from Rs 101 (2020) to Rs 126 (2024) (+66%, including Rs 40 in dividends).
- Engro Fertilizer: Price increased from Rs 73 to Rs 152 (+100%, including Rs 50 in dividends).
Fauji Cement
- CEO Transition: Lt Gen Muhammad Ahsan Mahmood → Qamar Haris Manzoor (2020).
- Performance Comparison (2016–2019 vs. 2020–2024):
- Profits increased from Rs 14 billion (Rs 3.5 billion/year) to Rs 18 billion (Rs 4.5 billion/year).
- Gharibwal Cement: Profits decreased from Rs 7 billion to Rs 4 billion.
- Share Price and Returns:
- Fauji Cement: Price increased from Rs 15.5 to Rs 18 (+24%, including Rs 1.2 in bonus shares).
- Gharibwal Cement: Price increased from Rs 14 to Rs 23 (+78%, including Rs 1.75 in dividends).
Askari Bank
- CEO Appointment: Waqar Malik brought in Atif R. Bokhari (2020).
- Performance Comparison (4 Years Pre- and Post-2020):
- Profits increased from Rs 22 billion (Rs 5.5 billion/year) to Rs 56 billion (Rs 14 billion/year).
- Allied Bank: Profits increased from Rs 54 billion to Rs 97 billion.
- Share Price and Returns:
- Askari Bank: Price increased from Rs 18.5 to Rs 20 (+54%, including Rs 8.5 in dividends).
- Allied Bank: Price decreased from Rs 100 to Rs 87, with an 18% total return.
Mari Petroleum
- CEO Transition: Lt Gen Ishfaq Nadeem Ahmed → Faheem Haider (2020).
- Performance Comparison (2016–2019 vs. 2020–2024):
- Profits increased from Rs 55 billion (Rs 13.75 billion/year) to Rs 151 billion (Rs 37.75 billion/year).
- Pakistan Oilfields: Profits rose from Rs 45 billion to Rs 92 billion.
- Share Price and Returns:
- Mari Petroleum: Price increased from Rs 1,310 to Rs 2,517 (+132%, including Rs 516 in dividends).
- Pakistan Oilfields: Price decreased from Rs 450 to Rs 435, with a 57% total return.
Key Takeaways:
- Performance Improvement: Significant progress across most Fauji companies post-2020 with reductions in losses or increases in profitability.
- Market Perception: Mixed stock performance—Fauji Foods struggled while others like Fauji Fertilizer and Mari Petroleum thrived.
- Leadership Impact: Civilian leadership appears to have driven stronger financial and operational results, backed by experienced boards.