By Mak Yuen Teen

Yesterday (June 24), MC Payment (MCP) released a second circular for the EGM to be held on June 30 to consider the proposed appointment of five directors, pursuant to an EGM requisitioned by Mr Ching Chiat Kwong, the controlling shareholder. This morning, the company issued its responses to queries from SGX Regco with respect to this second circular.

In cases of a boardroom tussle such as the one we are witnessing at MCP, the current NC and board cannot be perceived to be objective in opining on the suitability of the directors. The queries by SGX Regco and  comments by the continuing sponsor in the circular have raised apparent inconsistencies between the position taken by the NC now, and the NC at the time of the AGM held in April – in the case of Mr Ng Weng Sui Harry and Mr Shawn Ching Wei Hung who are proposed as directors now and who were also proposed for re-election in April’s AGM. The board’s responses to SGX Regco’s queries on this matter are not convincing and raise other concerns.

One of the explanations given is that the composition of the NC has changed. The previous NC comprised Dr Lillian Koh Noi Keng, Mr Kesavan Nair and Mr Ng Weng Sui Harry. The company said that the NC “presently comprises Mr Albert Saychuan Cheok, Mr Ong Kim Huat and Dr Lillian Koh Noi Keng”. What the company fails to say is that Mr Ong is the NC Chairman, while at the time of the AGM, the NC Chairman was Dr Koh. Neither Mr Ong nor Dr Koh had ever served on the board of an SGX-listed company before their appointment at MCP. Mr Cheok is the independent board chairman.

In the case of Mr Ong, based on disclosure on his appointment, he has served on only one board of a listed company – Hong Kong- listed Hon Corporation, and only for about 8 months. When he was appointed to MCP on May 27, it was disclosed that he “will complete the relevant training in Singapore to familiarise himself with the roles and responsibilities of a director of a public-listed company in Singapore….within one year from his appointment”. It is not even a month since his appointment so Mr Ong may not have had the opportunity to attend the relevant training. Even if he had, it is unlikely such training will be sufficient to prepare him for his role as NC chair, leading the assessment of the suitability of directors.

Dr Koh is in a similar position. In the RTO circular, it was stated that Dr Koh had undertaken to complete the relevant training within one year from completion of the RTO. Again, even if she had attended the training by now, it is unlikely that such training will have sufficiently covered how the NC should discharge its responsibilities.  Yet, like Mr Ong, she was appointed as NC Chair after her appointment to the board, before Mr Ong took over that role. The consolation is that at the time of the AGM, the other two members have substantial experience as independent directors of listed companies (this is not necessarily saying that they would have extensive knowledge in discharging the responsibilities of an NC).

In trying to justify the change in the position of the NC, the current board has now cast doubt on the integrity of the nomination process preceding the AGM. By doing so, it has undermined its own credibility because five out of its current six directors were already on the board at the time of the AGM. It has now said that for the purposes of the re-election at the April AGM, it was an internal process “handled by Mr Harry Ng”. How can this process be handled by Mr Harry Ng when he was one of those proposed for re-election and the NC chairman was Dr Koh? Perhaps this is the result of putting an inexperienced director as NC chairman, and for that, the entire board led by the chairman, must take responsibility. It is the responsibility of the board chairman to lead the board in ensuring good corporate governance.

In its response to SGX Regco’s queries, the board also said that the current NC is now required to assess “how a candidate measures up in the knowledge and expertise in digital payment and digital technologies broadly”. While I agree that it is important today for directors to have some appreciation of technological trends and the risks and opportunities relating to these trends, it is not necessary for every director to have deep knowledge and expertise in digital payments and digital technologies. This is the case even for MC Payment which is in the business of digital payments. Based on this criterion, some of the current directors may not measure up too.

In the case of independent directors, I believe it is important to have at least one who has that deep knowledge to ensure robust (but  constructive) challenge of proposals from management. Requiring every director to have such deep knowledge is not only unrealistic, but counter-productive to ensuring an effective board with a diversity in skills, competencies and perspectives. In fact, it could result in groupthink.

Under normal circumstances, there are issues with NCs because they are made up of existing directors and there is a significant self-review threat when it comes to assessing independence and suitability of directors. In the case where there is a boardroom tussle like at MCP, it is worse. Expecting the NC in such a situation to say that the directors who are proposed are suitable is like expecting one party in a general election to say that candidates of the opposing party are suitable or better than their own candidates.

Where it is a Catalist company, the continuing sponsor has a role to play in opining on the suitability of the directors but there is also a risk that the continuing sponsor will be aligned with one side or the other. The continuing sponsor in this case has now said that it believes the proposed directors are suitable. In this current situation, there should be full disclosure of information about directors who are proposed for appointment or removal, and shareholders should make up their own minds and vote accordingly.

In my article titled “Boardroom intrigue at MC Payment” published in the Business Times yesterday (and a longer version published earlier on this website), I said that further changes are likely needed to take the company forward regardless of the outcomes of the coming EGMs (including the second EGM to consider the removal of five existing directors). When the dust is settled, the  company should carefully review its board and board committee composition and make further changes that are necessary for an effective board and good corporate governance. Those who are on the board after this rather acrimonious boardroom tussle should be prepared to step down if they are not the right fit – if they truly have the interests of all shareholders at heart.