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THE resignation of the group CEO of Singapore Post (SingPost), Wolfgang Baier, on December 10 sent shockwaves through the corporate community. Just five months earlier, Dr Baier had won the Best CEO award at the Singapore Corporate Awards for large-cap companies.
His departure aggravated concerns I have had with the corporate governance of SingPost for some time now, even though SingPost had just last month been named as one of the top 50 Asean publicly-listed companies based on the Asean Corporate Governance Scorecard. It was one of only eight Singapore companies on the list, and also won one of the two outstanding achievement awards per country given to companies that were outside the top three in that country. Based on its corporate governance disclosures, I can understand why it was lauded, but there were certain practices that troubled me.
On June 29 this year, I sent an email to the company's investor relations (IR) contact raising some questions about its business and corporate governance. I asked for my email to be forwarded to the board and indicated that I would be attending the AGM to be held on July 8. I sent the questions in advance because I did not want to take the board by surprise at the AGM. In the interest of transparency and so that readers can judge whether my questions were inappropriate or my email offensive, I reproduce below the email (except for some minor elaborations which gave context to some of my questions).
I am a shareholder of SingPost. First of all, thank you for sending the notice and annual report out in good time and not holding the AGM in the last week of the 4-month deadline like many other companies do.
I plan to attend the AGM and would like the following questions to be addressed by the board at the AGM:
1. SingPost is venturing more into e-commerce and financial services (such as its partnerships with Alibaba and AXA). It is at the same time disposing interests in traditional postal services. How will this new direction affect the quality of services of its postal services? What is the risk assessment that the board and management have done before embarking on these new activities? Will SingPost be subjected to regulation by MAS in its financial services business?
2. Compared to other companies here and many other global companies, SingPost has a relatively large board with 12 directors. Have the nominating committee and board carefully considered the board size and are satisfied that the board size is appropriate, notwithstanding the standard statement in the CG report that it has done so?
3. SingPost has an executive committee which met 14 times during the year, and with due respect, a relatively young CEO. Why is it necessary to have an executive committee which meets so often and is the executive committee managing the company together with the CEO? If so, should the independent directors on the executive committee still be considered independent?
4. The board has added new independent directors in recent years who appear to be well qualified, given the nature of SingPost business. However, there are a number of long-serving independent directors, some of whom have served on the board for almost 20 years. They are also more than 70 years of age. Given the change in the business of SingPost, do these directors have the necessary skills and competencies for the new strategies that SingPost is pursuing?
5. The board has engaged Egon Zehnder to support the review of independence of the long-tenure directors which has concluded that all the long-tenure directors remain independent. Does the board plan to repeat the practice of having Egon Zehnder facilitate a "particularly rigorous review" of independence annually and is there any plan for these long-tenure independent directors to retire in the near future in order to renew the board?
6. In addition to assisting with the board assessment and the review of director independence, what other services, if any, does Egon Zehnder provide to the company? What was the amount of fees that the company paid in total to Egon Zehnder during each of the last two financial years?
Thank you for forwarding these questions to the board."
I received a very polite acknowledgement from IR.
I duly went to the very well-attended AGM at Suntec Convention Centre. Before the meeting started, I chatted with one of the directors and asked if he had seen the questions I had sent. He said he had not.
As the meeting progressed, it did not appear to me that my questions were going to be acknowledged and answered. So I put up my hand to ask about the long tenure of the independent directors when the resolution for the re-election of the chairman, Lim Ho Kee, was to be put to the vote (SingPost has three independent directors who are 70 years old or more, including the chairman, who had to be re-elected annually under the prevailing Companies Act provisions). For this resolution, Mr Lim had passed the chair to Mr Goh Yeow Tin, the deputy chairman. To my surprise, Mr Goh said that my question was not relevant to the resolution (or words to that effect). I responded that it cannot be that a question about the long tenure is not relevant when the chairman is one of the long tenure directors who is up for re-election. I was allowed to proceed.
I took the opportunity to compare SingPost's board size with other Singapore government-linked companies, many much larger than itself, including Singtel, which is of course SingPost's largest shareholder (Singtel currently has nine directors compared to SingPost's 12 directors, and a market capitalisation more than 16 times that of SingPost). The chairman responded that there are many factors that determine board size. I can accept that SingPost's board size is somewhat affected by the fact that two of its large shareholders, Singtel and Alibaba, each have a nominee director, but I felt that its large board size was due to the company adding new directors without rotating some long-serving ones off.
I also asked about the relevance of the skills and competencies on the board given SingPost's new businesses and about board renewal. I did not proceed with the other questions (except later asking a question about the tenure of the external auditors) because I wanted to give other shareholders the opportunity. The chairman said that they would consider the issues I had raised.
Another surprise for me was when a shareholder asked about the significant increase in directors' fees. The chairman asked the CEO to respond. It seems inappropriate to ask the CEO to justify directors' fees at an AGM and, not surprisingly, the CEO endorsed the increase. I would have thought the Compensation Committee Chairman would have taken that question.
What led to this commentary
All the resolutions were passed with a high level of support although many shareholders would already have given their voting instructions. After the AGM, SingPost released an announcement with a sweeping statement that all resolutions had been passed with no breakdown of votes even though all resolutions were voted by poll. It also did not release detailed minutes or summary of key points for the AGM.
I left the AGM with more concerns than before as I did not see any sign that my questions were been seriously considered. Anyway, I thought I would wait until the next annual report and AGM to see if there are signs of positive changes in SingPost's corporate governance. Unfortunately, the sudden departure of the group CEO has raised further concerns and led me to write this commentary.
The CEO is not the first recent major departure from the company. On July 24, SingPost announced the cessation of the 41-year old group CFO who was leaving "to pursue other career aspirations". Perhaps being a relatively young group CFO of a large cap company with many exciting new developments is not fulfilling enough.
On September 1, SingPost announced the appointment of 57-year-old Mervyn Lim as the new group CFO. The new CFO had been a business adviser and lecturer over the last three years and prior to that, had experience as CFO of several listed companies and startups. On December 1, he was given the additional appointment of Deputy CEO (Corporate Services) and, with the departure of Dr Baier, he will now cover the work of the group CEO.
Mr Goh Yeow Tin, the deputy chairman, will be appointed executive director from January 1, 2016 for 12 months to "oversee the Group's post-merger integration work, and the businesses and operations in Singapore". Mr Goh, who is 64, joined the SingPost board on July 7, 2014. He started his career with the Economic Development Board and spent 12 years as the vice-president and general manager of Times Publishing Limited. He is also the lead independent director of Vicom Limited and Sheng Siong Group Ltd, independent director of Lereno Bio-Chem Limited and AsiaPhos Limited, and non-executive chairman of Seacare Medical Holdings Pte Ltd.
One must question whether Mr Goh has the necessary knowledge about the business, experience and time, to undertake what sounds like a rather onerous task - especially working alongside an acting group CEO who is also new and who appears to be still holding the group CFO reins. Shareholders of the other companies should probably also ask if Mr Goh will still have enough time for them. With Mr Lim Ho Kee stepping up his "involvement to provide management with more time and guidance over and above the normal oversight of the role", further questions would also arise about his designation as an independent director.
It is a shame that many of the good practices of its largest shareholder, Singtel - such as ongoing assessment of expertise, skills, attributes and diversity of the board, policy on tenure of directorships, and an emphasis on board renewal - do not appear to have rubbed off on SingPost.
While there have been many exciting business developments in SingPost in recent times, I fear that things will go pear-shaped if the board does not address questions such as its skills, competencies and experience; board renewal; long tenure of the independent directors; and the distinction between the board's and management's roles. Constant churn of the CEO position at the company, with Dr Baier's four-year term long by SingPost's standards, may make it difficult for the company to attract good candidates.
The next AGM is unfortunately a long way away. I hope that large shareholders will look at what is happening at SingPost and engage with the company about its corporate governance and transition plans.