SingPost board gets Singtel stamp through slew of policy changes

Singapore

IT has been just over a month since Singtel chairman Simon Israel took over as chairman of Singapore Post, and already, the Singtel influence on the postal and e-commerce group's board are visible.

In one sweep on Thursday, SingPost dissolved its executive committee, changed the scope of its nominations committee and made 18-year-long board tenures - such as that of former independent director Keith Tay - a relic of the past. The group will now cap tenures at nine years, like its parent Singtel does.

Observers, reacting to the changes, said that if these policies had been in place as safeguards right from the start, the corporate governance lapses recently uncovered at SingPost might have been minimised or even averted.

The changes to SingPost's policies come in the wake of a special audit earlier this year, which found weak controls at the board, potential inaccuracies in records and a lack of proper procedures for evaluating deals and disclosing conflicts of interest.

The changes also come ahead of the findings of a broader corporate-governance review underway in the group.

Though SingPost did not explicitly mention the special audit, its moves on Thursday appeared to address some of the gaps which the special auditors identified in their findings released in May.

In a Singapore Exchange (SGX) filing on Thursday morning, the group spelled out a code of conduct and ethics for directors, along with policies on directors' conflicts of interest and board tenure. The code of conduct includes directives on conflict of interest, confidentiality, compliance, fair dealing and reporting unethical behaviour, SingPost said.

Mr Israel, chairman of both Singtel and SingPost, said in a statement that the code of conduct "will help frame the board's discussion of the recommendations from the corporate-governance review"; he added that he expected the recommendations from the review to be delivered by the end of this month.

SingPost also laid out a new board renewal policy. While former SingPost chairman Lim Ho Kee and Mr Tay - the man at the centre of the recent special audit - had both been on the board for 18 years since 1998, SingPost said on Thursday: "No director is expected to serve beyond nine years."

The new board-tenure policy resembles Singtel's, where directors have a maximum tenure of nine years.

Singtel owns 23 per cent of SingPost, said its 2015 annual report.

SingPost also made changes to its board committees that brought it closer in line with Singtel.

It dissolved the executive committee that had been in charge of approving investments and divestments within threshold limits set by the board; Singtel does not have such a committee.

It also turned its nominations committee into a "nominations and corporate-governance committee", that it said was in charge of ensuring compliance with the code of conduct. Singtel's board has a "corporate governance and nominations committee", said the telco's website.

Observers lauded SingPost's new policies as a good fresh start.

But David Gerald, president of investors' lobby group Securities Investors Association Singapore (SIAS), said: "If these policies had been in place from the very start, there's a good chance that SingPost could have avoided its recent CG (corporate governance) lapses.

"Although these rules should have been in place long ago, it's better late than never."

Corporate-governance specialist and SingPost shareholder Mak Yuen Teen also said that having these policies from the start "would certainly have minimised the risk" of corporate-governance failures at the board.

But he stressed that policies are only effective if they are complied with, adding that the group can assure stakeholders that it is implementing the policies by having its internal auditors check compliance with the policies or by carrying out separate governance audits.

"Clearly, in the past, internal audit had a minimal role as far as board governance is concerned, as otherwise, the absence of proper policies, procedures and controls identified in the special audit report should have been picked up. Unfortunately, this is a common problem with many companies - internal audit checks on everybody else but not the board."

Robson Lee, a partner at global law firm Gibson Dunn, pointed out that since SingPost's new code of conduct and policies contain basic principles of ethics and proper conduct that are already required of every director in a public-listed company, the key to averting corporate-governance lapses would lie in ensuring adherence to the policies.

"The culture of good governance, transparency of management decisions, timely disclosures and proper resolution of any potential conflict of or possible pecuniary interests must take root right at the top from the board and cascade down ... This will enable the full spirit of the new code to be institutionalised within the group and bring proper closure to the unfortunate episode in the history of SingPost."

Joyce Koh, executive director at the Singapore Institute of Directors, said SingPost's new code of conduct was one of the most comprehensive she has seen and goes beyond leading practices. "Some directors on other boards might even find some of the measures a bit extreme".

But she added: "What is most important is that the policies emphasise the spirit of the code ... No set of prescriptive procedures can cover everything, given that company and business dynamics are fluid."

An SGX spokesman said on Thursday that it views "positively efforts by any company which are intended to raise governance standards"; it added that it was still reviewing the special audit findings and would wait for the results of SingPost's corporate-governance review "before determining the appropriate course of action".

SingPost shares fell a cent to S$1.55 on Thursday after its announcement.