By Mak Yuen Teen
On January 31, Business Times published the report “Noble refutes Goldilocks claims, says management is essential to business”. The report mentioned that Goldilocks had purchased its stakes through two market transactions and had asked for two board seats as a pre-condition to any detailed talks about restructuring or investment options. Noble said: “The board’s nomination committee met to consider this request and was not comfortable acceding to this request, for corporate governance reasons. This was carefully explained to Goldilocks.” What really irks me is that Noble has the cheek to cite corporate governance reasons for doing anything.
After Iceberg Research started criticising Noble, I wrote about the corporate governance of Noble, including a commentary in the Business Times on June 24, 2015 titled “Noble should pay heed to its corporate governance”. Since then, I have written or tweeted that Noble has really not improved at all. Because of this, when I was asked about Noble’s future, I had consistently said that there is no future. It’s unfortunate that Noble was able to attract continuing support despite it clearly having very little interest in improving its corporate governance and transparency.
Take its current corporate governance for instance. The board now consists of six members plus its former executive chairman Richard Elman as founder and chairman emeritus. Paul Brough, who joined the board in 2015 as an independent director, is now listed on the website as an executive chairman. I have gone through the Noble’s announcements and news reports and did not see any mention of him assuming an “executive chairman” role. The news reports on his ascension to the chairman’s role in May 2017 also did not mention that he was now going to be an executive chairman. But he is clearly performing an executive role. The problem is that he still chairs the audit committee – so much for the audit committee having all non-executive directors and being chaired by an independent director based on our corporate governance code (and corporate governance rules in every country I know of around the world). When Mr Brough was first appointed, I had mentioned that he was a former partner at KPMG (Hong Kong) at the same time as when the then audit committee chairman of Noble was a senior partner. This is consistent with how Noble recruits directors because it says that its nominating process involves the chairman asking directors for recommendations. It remains the way Noble recruits directors today based on its corporate governance report. Too bad the directors and the nominating committee did not recommend the appointment of candidates proposed by Goldilocks – for corporate governance reasons no less.
Mr Brough also serves with Mr Elman on the three-member remuneration and options committee – so much for the remuneration committee comprising only non-executive directors. The remuneration of management in Noble has being under constant scrutiny, including recently when it was revealed that its outgoing CEO Jeff Frase was paid US$20 million last year while the company lost billions, and Mr Brough, Mr Elman and William Randall were paid a total of US$15 million. There is a clear conflict of interest in having Mr Brough and Mr Elman serving on the remuneration committee.
There reaches a point when a company is not worth saving and stakeholders should consider liquidation. In my view, Noble is long past that point. The haircut that various stakeholders are expected to take will leave them basically bald. I believe the focus of stakeholders should now be on putting a new board or liquidators in charge, which should then look at preserving the little that is left and ensuring that more resources do not unnecessarily leave the company. They should also review the actions of the previous board and management to see if civil action should be taken, including possibly clawing back remuneration.
It is now time for accountability.
