KUALA LUMPUR, July 26 (Reuters) - Malaysia's 157.2 billion ringgit ($39 billion) sovereign wealth fund Khazanah Nasional Bhd's managing director and its entire board offered to resign in the biggest management shake up at state-linked firms since the new government took charge.
Sources told Reuters that Khazanah executives met on Tuesday, when the entire board submitted undated resignation letters to the prime minister.
The decision was taken due to pressure from the government, especially after Prime Minister Mahathir Mohamad's public comments calling for a change in Khazanah's leadership and business direction, the sources said.
"There's a realisation that things could not continue as they were," said one source familiar with the matter who did not want to be identified.
Since his dramatic win in the May 9 polls, Mahathir has booted out top executives at state linked firms and agencies, and instructed his government to revamp companies it controls.
He replaced the central bank governor and the chief of Malaysia's largest fund management firm in the last few weeks, both appointed by the scandal-hit former premier, Najib Razak.
Khazanah said in a statement on Thursday that the government would make a final decision on the fund's leadership "in order to facilitate a smooth and orderly transition under the new government".
It said the board "feels it appropriate to offer the new government the discretion and reaffirm the prerogative to form the new board".
Khazanah's portfolio of more than 100 companies includes core holdings such as Malaysia's second-biggest bank, CIMB Group Holdings Bhd, utility group Tenaga Nasional Bhd and telecoms firm Axiata Bhd.
Khazanah Managing Director Azman Mokhtar, whose term expires in the first half of next year, has hinted before that he may not seek an extension of his contract. Azman has led the fund for 14 years.
Speaking in parliament shortly after Khazanah's announcement, Finance Minister Lim Guan Eng told reporters Mahathir would decide on the matter now.
"I think it was a wise decision to leave the decision to the prime minister," he said, adding that Azman and the board's position was not discussed by the cabinet.
Talk about management changes at more state-linked companies, including Khazanah, has been swirling for the past few weeks.
Mahathir's coalition took office after voters rejected former premier Najib's long-ruling party at an historic election in May and has since promised big structural reforms at state-linked firms and agencies in an effort to boost governance and accountability.
Najib is now being investigated over the multi-billion dollar scandal at state fund 1Malaysia Development Berhad (1MDB).
Funds from deals with Khazanah were used by the previous government to meet some liabilities of the debt-laden 1MDB, although the fund has said it had no control over the utilisation of those funds.
Najib was on Khazanah's board but quit after the election. His brother Nazir Razak, who is also the chairman of Malaysia's second largest bank CIMB, remained on the board.
In an apparent purge of officials linked to the previous administration, the government replaced the chairman of Permodalan Nasional Bhd (PNB), Malaysia's largest fund management firm, last month. It also named a new central bank chief in June.
Khazanah took Malaysia Airlines private in 2014 as part of a 6 billion Malaysian ringgit plan, months after one of the airline's planes went missing en route to Beijing and another was shot down over Ukraine.