A FRACTURED relationship between the board and management of Singapore Post contributed to last year's shock resignation of its former chief executive officer Wolfgang Baier, the group's newly elected chairman Simon Israel openly acknowledged at its packed annual general meeting (AGM) on Thursday.
He also indicated that the group does not plan to ask Dr Baier to take back the helm despite recent board changes, saying that the board believed SingPost's integration task ahead required a "different profile" of CEO.
Shareholders can realistically expect the vacancy to be filled at the end of the year, he added.
In a frank, forthcoming assessment of the group's circumstances and its road ahead, Mr Israel - who took over as chairman two months ago - pre-emptively addressed the reason for Dr Baier's resignation, as well as the questions of whether SingPost had overpaid for its recent acquisitions and its pending deal with Chinese e-commerce giant Alibaba.
Mr Israel unflaggingly fielded close to three hours' worth of questions from the floor, which were mostly to do with the substantial goodwill from acquisitions on SingPost's books, but also warned that its postal service was a "burning platform" vulnerable to disruption, that SingPost's blended return on equity (ROE) was likely to drop over time and that the group would review its dividend policy.
And though he stopped short of overtly criticising the previous board leadership, he pointed out that SingPost's reputation has suffered from there having been important governance questions put to the board last year, "which, unfortunately, were not answered fully and may have raised further concerns".
Hundreds of shareholders turned up at the AGM at Suntec convention centre, forming a snaking queue to enter the large room.
Unlike his predecessor Lim Ho Kee, Mr Israel took all questions raised. Neither Mr Lim nor former lead independent director Keith Tay, the man at the centre of SingPost's recent corporate governance special audit, appeared to have been present at the meeting.
Referring to Dr Baier's role, Mr Israel said that the group's recent corporate governance review "suggested that more could be done at the board level to recognise and distinguish between the board's stewardship role and the role of the group CEO and management in executing the company's strategy". "I think we can all assume that this may have influenced Dr Baier's decision," he said.
The recent departure of chief operating officer Sascha Hower was also "not unusual" in the wake of Dr Baier's, and the group already has a strong internal candidate to step into the role soon, he added.
Most of the questions raised by the shareholders at the AGM were about potential goodwill impairment and the assumptions underlying the valuation of the group's recent acquisitions.
Mr Israel said it was "very unlikely" a board would "knowingly approve overpaying for an acquisition", and that the assumptions underlying the business cases for the purchases had yet to stand the test of time. Its two recent purchases in the United States - TradeGlobal and Jagged Peak - were highly seasonal businesses that peak in the lead-up to Christmas, so it would be "premature to take stock and reach conclusions on their progress", he said.
He also devoted a substantial chunk of time to SingPost's future plans, stressing that shareholders "need to recognise that our domestic mail business, on which we are still highly dependent, is a burning platform, subject to the forces of digital disruption".
Noting that the group has enjoyed a historical ROE of 17 to 21 per cent due to its legacy postal business, he said: "We can't expect this level of ROE from our recently acquired businesses, so you should expect the blended ROE of the group to decline over time."
Though SingPost is working on a joint business plan with Alibaba, this was "taking some time", and Alibaba's recent purchase of e-commerce platform Lazada "has added to both opportunity and complexity".
The group may have to take more debt, depending on whether new capital comes in and whether it can sell off more non-core assets, he warned, and added that the group's dividend policy needs to be reviewed "so that it is sustainable through our transition".