Assuring outcome needed from SingPost

Published December 29, 2015

First published in Business Times on 31 December, 2015

By Melissa Tan

THOUGH December tends to be a quiet time for most corporates, for Singapore Post it has been anything but.

Having kicked off the month with the shock resignation of its widely lauded CEO, the postal and e-commerce group looks set to end it with a bunch of unresolved corporate governance questions that centre on its failure to properly disclose a director’s conflict of interest in at least one deal.

Then again, SingPost might be no stranger to such issues. For one thing, this is not the first time the group has found itself scrambling to name a CEO successor.

Long-time market watchers might also remember a SingPost director’s disclosure lapse 10 years ago regarding a then acquisition target, Accord Customer Care Solutions (ACCS), that happened roughly alongside a Commercial Affairs Department (CAD) probe into ACCS and later led to that director’s resignation from the board.

The pressing problem for SingPost now is to make sure it does a good and thorough job on two thorny tasks: finding the right person to take over the reins from outgoing CEO Wolfgang Baier; and having its upcoming corporate governance special audit done in a way that is not just independent but also perceived to be independent by the market.

Filling Dr Baier’s shoes

Dr Baier looks to be leaving the group just as it enters a post-M&A integration stage – arguably the most crucial part of its transformation journey over the past few years, since it will now need to start turning revenue expansion into actual earnings growth.

The e-commerce arena that SingPost wants to play in is also growing increasingly cut-throat, with new entrants sprouting up seemingly by the minute. Even engineering firm A-Sonic Aerospace has got in on the act, saying in December that it was taking a stake in a logistics firm.

SingPost has said that Mervyn Lim, who is both group CFO and deputy group CEO for corporate services, will cover the work of the group CEO in the interim. Before joining SingPost, he had been a business adviser and lecturer for three years. He might potentially use this period to prove he can cut the mustard and fill the succession gap.

Even so, SingPost will be expected to take the prudent step of conducting an intensive and extensive search, both here and overseas. As Dr Baier has ably shown, the right man or woman for the job need not and might not be a local.

Long search

How long the group will take to find a capable successor who can captain the group through fresh challenges remains to be seen. It took roughly one-and-a-half years the last time to name Dr Baier as the new group CEO.

And prior to his roughly four-year tenure, the post of group CEO at SingPost could perhaps have been seen as a revolving door. The very first group CEO, former Citibanker Lau Boon Tuan, quit at the end of August 2007 after slightly over two years in the role. Wilson Tan succeeded Mr Lau and, similarly, quit after slightly more than two years at the helm in April 2010.

After Mr Tan came Dr Baier, who took the reins in October 2011. Known for transforming SingPost from a staid mailman into an e-commerce logistics player, Dr Baier abruptly resigned on Dec 10 this year.

Though the reason given was that he was off to “pursue new endeavours”, market talk has since surfaced that his sudden departure was linked to differences between him and the board led by chairman Lim Ho Kee, who has been a director of SingPost since 1998. The Business Times has not been able to verify the speculation.

SingPost has said that in the interim, Mr Lim “will step up his involvement to provide management with more time and guidance over and above the normal oversight of the role”.

It is not the first time Mr Lim has stepped up involvement after a group CEO quit. A few years back, SingPost revealed in its annual report released in 2011 that he would get a special one-off payment of S$675,860 for spending extra time with the company after Mr Tan left, taking his final pay package for that FY to S$752,300.

According to a June 2011 Straits Times report, lead independent director Keith Tay had said: “The special payment of S$675,860 was paid to Mr Lim for the extra time he had to spend on management oversight for the period of July 2010 to March 2011 . . . Mr Lim was needed to help the management team navigate a number of key initiatives.”

Disclosure issues

The other problem SingPost is expected to solve is an array of unanswered questions about its corporate governance – specifically, its lack of proper disclosures – and Mr Tay happens to be right at the centre of that.

Notably, this is not the first time SingPost has faced issues with disclosing conflicts of interest. Nearly a decade ago, Tommie Goh stepped down from the board after an embarrassing disclosure lapse on his part, linked to SingPost’s planned acquisition of Accord Customer Care Solutions that was later scrapped.

This time round, all eyes will be on the scope of SingPost’s upcoming corporate governance special audit, which it has yet to publicly specify. The scope is crucial – market watchers have pointed out that it will likely influence the perceived independence of the audit.


On Dec 23, Mr Tay made a request to Mr Lim for special auditors to investigate certain “issues” that SingPost did not spell out in its statement. The day before that, the group admitted that it had not properly disclosed Mr Tay’s conflict of interest in its 2014 acquisition of freight forwarder FS Mackenzie, citing “administrative oversight”. Mr Tay, who like Mr Lim has been on SingPost’s board since 1998, is a director and shareholder of Stirling Coleman Capital, which SingPost said had been the “arranger” for its FS Mackenzie deal.

Though SingPost only mentioned the FS Mackenzie deal in its bourse filing, another more recent deal is worth looking at too: its purchase of a stake in Famous Pacific Shipping (NZ) in January 2015, for which Stirling Coleman had indicated on its website that it was the “financial adviser to seller”.

Did Mr Tay declare his interest in the Famous Pacific deal and abstain from voting on it? A SingPost spokesaman told BT that Mr Tay had abstained. In that case, why was Mr Tay’s conflict of interest not disclosed in SingPost’s SGX filing on the deal? So far, SingPost has been silent on that front. This is one of the pressing questions that market observers will be hoping the upcoming special audit can shed some light on.

The group’s recent admission of disclosure failure may remind some observers of what transpired with ACCS 10 years ago. SingPost had announced its intention to invest in ACCS in early March 2005, after ACCS shocked the market by saying that it had lost almost all its Nokia contracts, had overstated its earnings, and was under CAD investigation.

Soon after, the deal came under intense scrutiny when it was disclosed that three SingPost directors – Mr Goh, Mr Lim and Tan Yam Pin – held stakes in ACCS.

Mr Goh, who had failed to disclose his substantial stake in ACCS, blamed “inadvertence”. Mr Lim revealed that he had bought shares in ACCS after it announced the Nokia contract losses, and that he stopped buying just days before talks on the planned investment started.

A bombshell came when SingPost and Mr Lim said in late March 2005 that they were helping in a CAD probe, triggering speculation that this was linked to Mr Lim’s purchase of ACCS stock. However, this was not confirmed. The CAD cleared Mr Lim of any wrongdoing a few months later, in October 2005.

Time will tell what the upcoming special audit will uncover.

Closely watched

To its credit, the Singapore Exchange, as the frontline regulator, has made it clear that it was keeping an eye on what happens at SingPost, a prominent company that counts Singtel as its single largest shareholder. It said earlier this week that it was reviewing the matter and would assess the group’s compliance with listing rules after the special audit report is out.

The latest developments – and it seems a great pity – come just as SingPost is capturing the market’s imagination as a transformation play. For regulators, shareholders and indeed staffers, how the board and management act in the coming months will be closely watched, and nothing short of an assuring and convincing outcome will be demanded.

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