First published in Business Times on December 24, 2015-12-24

By Melissa Tan

SINGAPORE Post will undergo a special corporate governance audit in the wake of questions over its disclosure standards and its own admission of “administrative oversight”.

And in response to a BT query, Singtel said that it expects SingPost to take decisive action to ensure that shareholder interest is being protected. Singtel is SingPost’s single biggest shareholder, with a 23 per cent stake.

SingPost, in a Singapore Exchange filing on Wednesday, said: “In view of the seriousness of the issues raised in these (BT) articles, Mr Keith Tay Ah Kee has requested the Chairman of the Board for Special Auditors to be appointed immediately to investigate these issues thoroughly and to report directly to the Board and the Audit Committee.

“Mr Tay has also requested that such report be made available for inspection by the Singapore Exchange, the Info-communications Development Authority of Singapore and other regulators, and that appropriate disclosure should also be made to shareholders and other stakeholders.”

It added that the chairman has acceded to the request and has instructed management to proceed accordingly. SingPost also said that Mr Tay, a director of the company, has “stressed that he will recuse himself completely from this matter during the investigation and that he will render all assistance and cooperation to the special auditors if and when required”.

When contacted, SingPost spokesman Peter Heng told BT: “The independent audit will cover corporate governance and a review of the internal processes relating to mergers and acquisitions, subject to finalisation with the independent auditor.”

He also said that SingPost was evaluating international audit firms and will identify the proposed independent auditor.

The Big Four audit firms all told BT that they were unable to comment.

Market watchers said that what’s crucial was the scope of the special audit. They added that SingPost should declare just what it was that made the probe necessary and make public any related material information so as to avoid creating a false market.

The special audit move comes a day after SingPost admitted an “administrative oversight” in a July 2014 deal disclosure. It had not properly disclosed Mr Tay’s interest in its 2014 acquisition of FS Mackenzie.

FS Mackenzie is a UK-based freight forwarder that SingPost agreed to pay up to £7 million (S$14.8 million) for in July 2014. SingPost said that Mr Tay actually had an interest in the deal at the time it was done, although he had abstained from voting on the deal.

It did not say whether Mr Tay had recused himself from all board discussions related to the acquisition.

Mr Tay, a retired accountant who used to head KPMG Singapore, has been on SingPost’s board since April 1998. He is also a director and shareholder of Stirling Coleman Capital Ltd, a firm that SingPost said had been the “arranger” for its purchase of FS Mackenzie.

Market watchers said that the special audit could be a good first step for SingPost, whose chief executive officer Wolfgang Baier abruptly resigned in early December.

“Corporate governance isn’t just about things not going wrong,” said Stefanie Yuen Thio, joint managing director of TSMP Law Corp. “It’s about a willingness to have your decision-making process vetted transparently and acknowledging accountability to your shareholders. SingPost’s response shows their commitment to doing this.”

However, observers also raised concerns about the investigation’s limits. For instance, SingPost’s special audit would probably not be able to establish how Stirling Coleman came to be a financial adviser to the seller for a few of SingPost’s acquisitions because that would require an audit of the seller or of Stirling Coleman, “which won’t be done”, said corporate governance specialist and SingPost shareholder Mak Yuen Teen.

Prof Mak, who has raised questions about public disclosures relating to Mr Tay’s possible interest in three of SingPost’s recent acquisitions – Famous Holdings; FS Mackenzie and Famous Pacific Shipping (NZ) Ltd, added that the scope of the special audit was crucial.

Adrian Chan, head of corporate at law firm Lee & Lee, hopes that the special audit would also address “all the other corporate governance issues” raised recently by market commentators and media reports so that “any systemic lapses” can be plugged. “Shareholders deserve to know that the company is not resorting to stopgap measures . . . It is hoped that the company will agree to share with the public the identified shortcomings and the steps taken to rectify and remedy any lapses.”

Corporate lawyer Robson Lee pointed out that a special audit is usually commissioned after a company experiences a “material negative development” or uncovers a “major lapse”. “What exactly are the serious issues concerning the company mentioned in the announcement today that warrant a special audit? This is material information that should be immediately communicated to the market so that investors are not trading without full knowledge.

“It is not clear why the person who is the subject of the commentary and story published in The Business Times would be the person requesting the chairman of the board to convene a special audit. Has the audit committee deliberated on the object(s) and scope of the special audit?”

Meanwhile, a Singtel spokesman told BT that the special audit process ought to be supervised by SingPost’s audit committee chairman and that Bill Chang, Singtel’s CEO of group enterprise and Singapore country chief, “will continue to discharge his fiduciary duties as a SingPost board director”.

According to SingPost’s annual report, Mr Chang does not sit on the SingPost board executive committee, which is responsible for approving investments and divestments within threshold limits set by the board.

The audit committee is chaired by Soo Nam Chow. Mr Tay is a member of the audit committee.

Mr Tay was deemed to be still independent in a recent review of long-serving directors’ independence that executive recruiting firm Egon Zehnder carried out, according to SingPost’s most recent annual report.

In the stock market on Wednesday, SingPost shares closed down a cent at S$1.66.