When four may not be enough

IF a large board is frowned upon as it can be unwieldy, then a small one ought to raise questions on its effectiveness to raise shareholder value.

Pick the number four; then make that two independent directors and two non-independent non-executive directors including a chairman who is majority owner of the firm.

What do we get? S i2i Ltd - a mainboard-listed firm formerly known as Media Ring, whose flagging business of distributing telecom and IT-related products and services pushed it to the corporate sidewalks of the Singapore Exchange's (SGX) dreaded watch list in March last year.

It wasn't always this way. Up until less than two months ago, it was a five-member board - about the low end of the average board size for a small cap firm.

That one included its executive director, Maneesh Tripathi, who was also the firm's group chief executive officer and made the news as the CEO who opted for a one-dollar salary package till the firm turned the corner (it managed a small recovery for the year ended December 2015).

He abruptly stepped down from the board in mid July but retained his six-year-old CEO post at the firm "to focus on the group's business and operations".

Except for Indian-born Singapore citizen Bhupendra Kumar Modi, S i2i's founder, chairman and its largest owner, the other three directors were appointed this year - one earlier in January and the other two in July following the resignation of two other independent directors.

None of the three has had any experience as a director of a listed company prior to their appointments to S i2i. Also, none of the four directors holds an executive position on the board. In short, it would be easy to appreciate how that could be a source of unease for minority shareholders. For one thing, does the board have the necessary mix of skills and competencies?

"Under normal circumstances, such a board composition (of four directors) would raise questions," says corporate governance specialist Mak Yuen Teen.

"Usually, one would expect an ED (executive director)/CEO to be on the board although there are probably about a dozen Singapore-listed companies that have no EDs on their boards," says Prof Mak.

This could be crucial for S i2i, more so, as it embarks on a new business to distribute and sell electrical vehicles (EV) in Singapore following a tie-up with a China-based EV maker that was announced in late July.

Incomplete disclosure

There are questions aplenty too about that recent deal. The company's incomplete disclosure over the pact drew two queries over six days from the SGX as it had not disclosed the identity of the company, the sum involved in the investment nor whether its substantial shareholders, directors or associates were involved in the Chinese firm.

In response, S i2i revealed that it was talking to Shenzhen-headquartered BYD Company Ltd and that none of its directors, substantial shareholders nor associates have any interest in the firm.

However, a week later and in further response to the SGX's same query, the firm pointed out that Smart EV had a distribution agreement with BYD which came into effect in February this year and five months later was terminated to "avoid competition" with its subsidiary Mellon Technologies.

Smart EV is indirectly owned by Mr Modi, while both firms (Smart EV and S i2i) share another common director. Such disclosures should have been forthcoming from the get go, not merely as a response prompted by the regulator.

"SGX monitors disclosures of listed companies and requires responses to our queries, which contain material information about the company, to be made public. The S i2i Limited case is one example of such monitoring efforts," said the SGX in response to a query from BT.

The deal also begs the question - is this the right time for S i2i to embark on a new business with a higher gestation period when the clock is ticking for it to come up with an exit route from the SGX's watch list or face the risk of being suspended or booted out of the official list?

Indeed, it may be a dicey move by the firm which has some 18 months to get its act together on this and that too, with a downsized board. A smaller board may work well for better camaraderie and cost less but the question is - can these directors bring in real results?