Hand-picked Noble committee not independent

THE recent announcement by the Noble Group that it has established an independent committee to review its accounting practises warrants a response.

This is a small step in the wrong direction. My problem with this supposedly independent committee is its extremely narrow and limited scope of only looking at mark-to-market (MTM) valuations and that only a Noble vetted summary will be released by the board committee. This hand-picked, insider board committee should not in anyway be considered "independent".

Noble is engaging in a PR exercise in which I, for one, have no confidence. As long as Richard Elman, the 75-year-old founder and executive chairman of Noble 20 per cent shareholder and member of the audit, nominating and compensation committees, has a formal role in Noble, there can be no possibility of a truly independent assessment of Noble's accounting.

Three of the four members of Noble's newly appointed "independent" accounting review committee, including its chairman, are all existing members of the audit committee which includes Mr Elman.

Will Mr Elman allow a truly independent committee to objectively assess his work as executive chairman after he declared this matter "finished" at the AGM? I, for one, think not.

Noble has had many months to provide the facts and has not done so. It has also bought back about 2 per cent of the company's stock in a futile effort to support the share price. Yet, as has been variously reported by The Wall Street Journal, the Financial Times, Reuters, Bloomberg and others, Noble's bond spreads and CDS spreads have widened, lenders are selling their positions and its bond ratings are one notch away from junk status.

Mak Yuen Teen, associate professor at the NUS Business School where he teaches corporate governance and ethics, has written an excellent article in The Business Times on the many corporate governance shortcomings of Noble Group.

I therefore reiterate my call for Mr Elman to immediately resign all roles with Noble, for its existing auditors Ernst & Young to be fired, the board to be restructured, and a new, truly independent, chairman to be installed to clean up this mess. Noble's CEO and CFO should be given one month to fully answer all questions to which, by now, they would surely know the answers. This new committee that has been appointed to assess accounting practices is too little, too late and too conflicted.

If Noble wants to begin to restore the confidence of the market on MTM valuations, then it should immediately and publicly release the full valuation model for Yancoal both before and after the recent 40 per cent writedown of US$200 million which still leaves Yancoal valued by Noble at 25 times its public market value.

Let the market decide if Noble's model and assumptions are more reflective of reality than the shares of a public company. Noble should also fully explain how Yancoal is treated as an associated company with only 13 per cent of the shares, well below the required 20 per cent. They could do this today with no new committee.

In the past, I have dared Noble to release the Yancoal model for public inspection. They have not. So now, I will make a formal offer: If Noble releases the full Yancoal valuation model, used both before and after the recent US$200 million writedown, I will personally donate S$10,000 to Singapore Special Olympics in Noble's name.

Hopefully, Noble now has a further incentive to do what they should have done five months ago - respect the owners of Noble and provide the raw data for the market to evaluate. This won't answer all questions, yet it would be a small step in the right direction.

I reiterate that I have no position in the shares of Noble Group and no economic interest whatsoever, nor do I want to see Noble further negatively impact shareholders and jeopardise the livelihood of its employees through its actions.

Michael Dee

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