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U-turn by chairman-designate underscores SingPost uncertainty

Friday, April 8, 2016 - 05:50

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Singapore

JUST six days - that's how long Low Teck Seng's status as Singapore Post chairman-designate lasted.

In a Singapore Exchange (SGX) filing on Thursday morning, SingPost said chairman-designate Low Teck Seng is withdrawing from the post, just under a week after naming him as successor to outgoing chief Lim Ho Kee. Board directors had been unanimous in their choice of Prof Low to replace Mr Lim, who will resign as chairman in May.

The apparent flip-flop poses yet another setback to the postal and e-commerce group, which is grappling with unresolved corporate-governance issues and digesting a bellyful of recent acquisitions.

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Meanwhile, another SingPost director, Keith Tay Ah Kee, told The Business Times on Thursday that he does not intend to seek re-election at the group's upcoming annual general meeting, after having been on the board for nearly two decades.

These moves come amid hints that more SingPost board changes will soon follow, with the spotlight trained on others on the board who might also resign.

The abrupt about-face by Prof Low leaves SingPost bereft of a clear successor to the chair; the group is also still searching for a group chief executive officer (CEO) to replace Wolfgang Baier, who suddenly quit last December.

Analysts are flabbergasted.

The stock took a nasty tumble, diving 3.4 per cent or 5.5 Singapore cents to close at S$1.57 - its lowest in a month. The market reaction was more severe than that on the day Mr Baier resigned; SingPost shares then had opened 2.3 per cent down, but rallied to end the day flat.

A sell-sider wrote in a note to clients on Thursday: "Seriously, is there something wrong somewhere in SingPost? This kind of uncertainty will not be good for the stock, especially in times when the business is transitioning to a global player . . . We have an 'add' rating, but better lean on the cautious side, as small details like this can mean a lot more between the lines."

Another said in a separate note that Prof Low's decision to decline the chairmanship "just days after the board's unanimous decision . . . appears to signal further underlying issues in relation to the company's corporate governance".

Prof Low, who became a SingPost director in October 2010 and used to chair the board's Compensation Committee, said in a statement that since April 1, when SingPost named him chairman-designate, he has "had time to reflect on my dual responsibilities as the new chairman of SingPost alongside my principal commitment as CEO of the National Research Foundation".

"As SingPost is at a critical and pivotal phase of its transformation and growth, the chairman's position would demand more time and focus than I would be able to give."

He did not say whether he had considered this before accepting the initial appointment.

But SingPost independent director Zulkifli bin Baharudin told BT that "to be fair, Prof Low had reacted instantaneously when he was unanimously appointed". "He felt duty-bound to do what was best for SingPost under the circumstances, and we had to find a solution from within the existing board members."

Noting that SingPost's announcement of his appointment as incoming chairman had contained the caveat that it was subject to regulatory approval anyway, Mr Zulkifli added that there is "still some time between now and May 10".

SingPost said in its statement that the board has started looking for a new chairman-designate both internally and externally. "This is part of a rigorous and holistic exercise to renew the board and build bench strength." It added that it expects to name an incoming chairman before Mr Lim steps down on May 10, which is when the company's full-year results are scheduled to be released.

Mr Lim also intends to resign as a director at SingPost's AGM in July, SingPost had said last Friday.

The group, which faces the task of successfully integrating various recent acquisitions, said its search for a new group CEO was "progressing well" and that it had identified some "potential candidates", but did not elaborate.

Corporate-governance specialist Mak Yuen Teen, a SingPost shareholder, said an external candidate for chairman "may make sense given its transformation".

"SingPost requires a very rigorous look at its renewal and competencies ... I think they could reduce the board size to about nine directors with relevant skills, experience and diversity - this could mean replacing a few more directors."

SingPost's website lists 12 directors.

Prof Mak had said last Friday that along with Mr Lim's impending resignation from the board, "I think Keith Tay will have to go ... He's not only long-tenured, but because of the conflict-of-interest issue".

SingPost is undergoing a special audit on corporate-governance issues that centre on Mr Tay's interest in the group's acquisition of stakes in three companies. This was after it admitted last December that it had failed to properly disclose Mr Tay's interest in a 2014 acquisition.

There have been hints that Mr Tay was under pressure to step down, and other directors may leave too.

Mr Zulkifli told BT on Thursday: "Keith Tay has the intention to not seek re-election at the July AGM." He declined to confirm other board departures, but said: "We are at the tail end of a comprehensive renewal ... You can expect some major changes on board."

When contacted, Mr Tay said in an e-mail that he had signalled his wish to step down as a director of SingPost since 2013, and had raised the matter again last year, "but the then-chairman (Mr Lim) strongly urged me to stand for re-appointment in view of the accelerated and intensive transformation of the company, which would therefore need my experience and expertise".

Given that he has been on the board for 18 years, "it is time to renew the board and therefore appropriate that I retire to make space for fresh eyes and new blood", he added.

"I am, of course, conscious that the joint special auditors will be releasing their report soon, and for that reason, believe that I should in the meantime stay on the board to ensure that I do my duty to assist and be accountable to my fellow directors. However, I do believe that the issues arising from the report ought to be fully resolved by the AGM in July, and as such, the timing is right for me to not stand for re-appointment."

SingPost had said in February that it expected the special audit, done jointly by PwC and Drew & Napier, to be completed in March. At the end of that month, however, it said it expected to release a summary of the special-audit findings to shareholders this month.

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