The former CEO of Proton Holdings Bhd, Tengku Tan Sri Mahaleel Tengku Ariff, has received RM5 million from his previous employers in settlement of a complaint over his claim made at the Industrial Court in 2006.

Current Proton chairman Datuk Nadzmi Mohd Salleh confirms that an agreement was reached with Mahaleel recently, but owing to confidentiality clauses, would not confirm the amount of the settlement. However, a person familiar with the situation says the sum is RM5 million.

Nadzmi maintains that the settlement should not be read as an acknowledgment of any wrongdoing on the part of Proton. He says the board felt it was time for a closure on an outstanding matter that had dragged on for the better part of four years.

“We just cannot be dealing with old issues. We are not in the business of going to court ... and here, we took the stance that we need to move forward [and make] all efforts for the company to chart its future direction clearly,” Nadzmi tells The Edge.

“It is not an admission that we are wrong. But we think it’s best to settle this and move forward, and we have taken that course of action.”

Proton managing director Datuk Syed Zainal Abidin Syed Mohamed Tahir adds that the dispute with Mahaleel was an issue inherited by Nadzmi, and that it was in the best interests of the company to settle it.

“When the chairman came on board, we looked at all the outstanding issues. This thing had been going on for too long and we believe it’s best to resolve this. We want to make sure the energy of the company is focused on the future,” Syed Zainal says.

Mahaleel declined to comment when The Edge contacted him by telephone.

To recap, Mahaleel was asked to go on leave by the board on July 26, 2005, effectively terminating his tenure as the CEO of Proton. His contract then was slated to expire on Sept 30, 2005.

The events that led to the non-renewal of Mahaleel’s contract began when he stalled over signing a new contract offered by Proton’s board in March 2005. The board was then chaired by Datuk Mohammed Azlan Hashim. Mahaleel, a close ally of former prime minister Tun Dr Mahathir Mohamad was reportedly unhappy with the terms of the contract, which were viewed as unfavourable compared to the previous contracts.

It is understood that among the terms of the new contract that the Kelantan prince found unacceptable was a requirement that he keep daily notes of his work at Proton and to make these notes available to the board whenever required.

It is no secret that the board was seeking to rein in Mahaleel, who was known for making decisions for Proton without prior board approval. The Proton board subsequently decided against renewing his contract.

Publicly, Proton’s board maintained that this was because it wanted to make changes to the company’s management structure and leadership. Privately, however, the board was clearly unhappy with Mahaleel’s performance towards the end of his stint as CEO, according to confidential briefing notes obtained by The Edge.

It is understood that the decision to settle with Mahaleel this time was influenced by Proton adviser, Mahathir, who has taken a more active role in Proton since the resignation of Azlan. A source tells The Edge that the board had initially planned on paying Mahaleel a smaller sum to settle the dispute, but this was subsequently raised to RM5 million upon the request of Mahathir.

The decision to settle with Mahaleel, it is said, played a part in the resignation of the two independent directors on Proton’s board — Oh Kim Sun and Kadir Kassim — who were unhappy with the board’s decision.

This article appeared in Corporate page of The Edge Malaysia, Issue 809, June 7-13, 2010