By Mak Yuen Teen
This is the first of a four-part series of articles on Raffles Education Corporation. It is based on a forthcoming case study to be included in Volume 10 of the Corporate Governance Case Studies published by CPA Australia and edited by Professor Mak Yuen Teen. While the case is written from public information and intended for discussion purposes, this series of articles includes some additional analysis and interpretation by Professor Mak. Any views expressed in this article are Professor Mak’s personal views.
The campus
Raffles Education Corporation Limited (REC) describes itself as a premier private education group and established its first college in Singapore in 1990. It has since grown to operate 22 colleges in 12 countries in the Asia-Pacific and Europe.[1] Its stated aim is to educate and empower youths by providing quality education that affords graduates a well-rounded hands-on experience which is relevant to the industry.[2],[3]
REC was listed on the SGX SESDAQ (now known as Catalist) in 2002 and moved to the SGX Mainboard in 2005.[4] It was ranked amongst the top 200 Asia-Pacific companies on Forbes Asia’s “Best Under a Billion” list from 2006 to 2009.[5]
The principals
REC’s founder, Chew Hua Seng (CHS), who is also the controlling shareholder, Chairman and CEO, was featured in Forbes Magazine as one of the wealthiest individuals in Singapore in the early 2000s. As the son of a fisherman, he came from a humble background, which motivated him to work hard since he was young. In the 1970s, he graduated with a degree in business administration from the then University of Singapore. However, CHS did not manage to get a job post-graduation, prompting him to set up his own company in the business of shipping and timber broking and “be his own boss”. Over the years, he moved on from his initial venture in timber trading to establish his own successful private education group.[6]
CHS’s wife, Doris Chung Gim Lian, is a senior management in the Group and manages a number of schools in Malaysia and Thailand.[7] His elder son, Chew Han Wei is the vice president in charge of the operations of colleges in Italy and India, and serves as the company’s IT director.[8] His second son, Chew Han Qiang, was appointed assistant vice president for the Group’s operations in Thailand in 2018.[9]
As of 25 September 2020, CHS and his wife held 43.5% of the ordinary shares of REC.[10] CHS is also the Non-Executive Chairman of Sitra Holdings (International) Limited, a distributor of wood-based products and lifestyle outdoor furniture, listed on the Catalist Board of SGX. CHS held 32.49% of Sitra’s shares as of 19 March 2021, while his brother, Chew Ah Ba George, had a 16.85% total interest.[11] On 4 October 2019, Sitra acquired a 54% interest in BVI-incorporated Mapur Rocky Resort Limited from CHS’s spouse, Doris Chung, and his son, Chew Han Wei.[12]
CHS’ younger brother, Patrick Chew Hwa Kwang, was co-founder and CEO of Midas Holdings Limited (Midas), which was listed on both the SGX Mainboard and Stock Exchange of Hong Kong. On 9 February 2018, trading of Midas’ shares was suspended[13] and Patrick Chew resigned on 22 March 2018, citing health issues.[14] It emerged that there was a massive fraud involving Midas’ subsidiaries in China. On 26 April 2018, Mazars LLP, which had been Midas’ auditors since 2012, issued a letter to Midas’ board stating that its auditor’s reports for FY2012 to FY2016 may no longer be relied upon.[15] About a month later, the Securities Investors Association (Singapore) (SIAS) withdrew its Most Transparent Company Award from Midas, which had been awarded to Midas every year from 2012 to 2016.[16]
CHS was not implicated in the scandal,. However, Midas’ Executive Chairman, Chen Wei Ping, and CEO Patrick Chew were both at Raffles LaSalle Limited (Raffles LaSalle) prior to taking up their roles in Midas. Raffles LaSalle is a subsidiary of REC. Chen Wei Ping had held the position of executive director (ED) from 1998 to 2003 in Raffles LaSalle. Prior to his appointment as ED, he was a marketing manager in 1997.[17],[18]
Poor lessons
Questions were raised about REC’s quality of education. Operational issues within REC led to concerns being expressed online. One former employee’s account in particular stood out.
Joana S. Kompa, an ex-programme director for digital media design and visual communication design who previously worked in Raffles International College Bangkok (Raffles Bangkok), shared her experience and opinions openly on her blog page. She asserted that REC failed to emphasise employing good quality educators. According to her, Raffles Bangkok had seven different college directors over the period from 2006 to 2017. Frequent changes in college directors were said to have hindered the establishment of a consistent education policy for students, diminishing the quality of education at Raffles Bangkok.[19]
Kompa also shared that REC did not develop qualification programmes to improve and hone the basic teaching skills of its staff. Teachers were said to have to reproduce their own learning conditions learnt elsewhere. Many untrained part-time teachers had no prior training to execute basic classroom management. Practices such as replicating materials from the internet, releasing answers in advance, and filling classroom time with YouTube videos or other superfluous activities became commonplace. Moreover, as REC classes were organised as intensive four-hour teaching blocks, teachers were often tempted to rely on these counterproductive practices to fill up excess time.[20]
The content taught to students was also allegedly outdated. For instance, even though Adobe Flash was no longer used on the web due to vulnerability issues, students were made to learn the application as part of their multimedia classes. Newer and more relevant skills such as developing mobile applications or coding were not integrated into the curriculum. Additionally, learning tools and equipment such as video editing suites, audio equipment, broadcast-level digital cameras or related software were apparently non-existent in the school.[21]
Kompa may be far from the only unhappy former employee. Glassdoor shows an average rating of 1.9 out of 5 based on 84 reviews for REC, with many of the comments raising concerns about how REC is managed.[22] While Glassdoor is not an infallible guide, it can provide useful insights into employees’ views. Directors should not rely completely on information provided by management.
Accreditation issues
“The Company has a department, known as Raffles University System, directly responsible for academic quality assurance, including accreditation.”
– REC’s response to a query raised by Securities Investors Association (Singapore)[23]
REC offers programmes for diploma, degree, and masters qualifications. While laws on education differ across countries, there is a common requirement to have higher education programmes accredited by the relevant authorities in the respective countries. To manage business risks relating to accreditation and operating compliance, REC set up a corporate unit called the Raffles University System. The Raffles University System is stated to be “responsible for all academic matters and adheres strictly to a rigorous reporting and audit system to ensure quality standards and assurance, as well as operational compliance”.[24]
According to the company’s response to a query raised by the SIAS in 2018, the Raffles University System also “advises senior management and the Audit Committee of risks, if any, that would affect the accreditation or continuing accreditation of [its] colleges and university”.[25] However, despite setting up the Raffles University System, REC faced accreditation issues for various programmes across its campuses, including in Thailand, Sri Lanka and Australia.
Thailand
In 2010, the Raffles Design Institute (RDI) in Bangkok was found to be operating without the permission of Thailand’s Office of Higher Education Commission (OHEC). It was reported that criminal proceedings were launched against RDI by the Thai authorities for its failure to cooperate. A RDI spokesperson claimed that there was a misunderstanding and that the school would meet with the HEC to clarify the matter.[26] However, according to Kompa, RDI had yet to acquire a valid international college license as of November 2017.[27]
Sri Lanka
On 16 June 2013, REC’s unit in Colombo, Sri Lanka – Raffles Design Institute Pvt. Ltd – was accused by local newspaper, The Sunday Leader, of misleading students by claiming that it had recognition from the country’s Higher Education Ministry for its diploma programmes, even though such recognition had yet to be confirmed. It was reported that the company was only registered with the Board of Investment of Sri Lanka as a business venture without any degree awarding status conferred yet either by the Higher Education Ministry or the University Grants Commission.[28]
REC responded to The Sunday Leader’s report on 23 June 2013 as follows:[29]
“We, Raffles Education Corporation Limited, are a reputable education provider listed on the Main Board of the Stock Exchange of Singapore. The article comprises allegations that are absolutely false and misleading. It is written with a malicious intent and is, without question, calculated to ridicule and injure the reputation of Raffles Education Corporation Ltd. and its college in Colombo, Sri Lanka.”
In the response, the company also addressed the issues raised on its Thailand college:[30]
“The truth is Raffles is not banned in Thailand and in fact we are in the process of being upgraded to university college status by the Thai authorities.”
Additionally, REC refuted The Sunday Leader’s allegation that the private education provider had claimed to be recognised by the Sri Lanka’s Higher Education Ministry “only to attract more students to follow their courses”. It said that it had already obtained approval from the Tertiary and Vocational Education Commission (TVEC) of Sri Lanka for its advanced diploma courses. It further asserted that an application had been made to the country’s Higher Education Ministry for degree awarding status, for which “in-principle approval” was already granted.[31]
The Sunday Leader included a reporter’s note when it published REC’s response. The reporter described how he posed as a parent to inquire about the “in-principle approval” and was informed by the company’s sales and marketing executive that approval from the Higher Education Ministry had already been granted. However, he received a contradictory response from the Higher Education Ministry when he called the authority to inquire about the same issue. The Higher Education Ministry said that REC’s application was still being evaluated.[32]
Australia
In June 2015, the company’s Australian campus, Raffles College of Design and Commerce (RCDC), lost its accreditation granted by Australia’s Tertiary Education Quality Standards Agency (TEQSA) for undergraduate programmes as it had failed to meet certain requirements of the Education Services for Overseas Students Act and the National Code of Practice for Providers of Education and Training to Overseas Students. Further, TEQSA said that RCDC “[did] not have the capacity to provide education of a satisfactory standard”.[33],[34]
In June 2017, REC attempted to re-register with Commonwealth Register of Institutions and Courses for Overseas Students (CRICOS) to allow the private education provider to offer its higher education courses to overseas students.[35] RCDC expressed confidence that CRICOS re-registration would be obtained in 2018 and conveyed this multiple times to its investors.[36],[37] However, in a turn of events, REC applied to TESQA to withdraw its registration as an Australian higher education provider on 26 November 2018.[38] Approval to withdraw was granted by TEQSA on 20 December 2018 with certain conditions imposed.[39]
Does the Raffles University System still exist? A search of the company’s annual reports found it mentioned until the 2019 annual report, but it was not mentioned in the 2020 annual report. Did the board of directors ask questions about the qualifications of the staff in this department and the resources allocated to it?
Key Takeaways
From this first article, it would appear that REC has significant issues in its education business. Is REC being run first as a business, with education as an afterthought? Does the background of the founder and his family members who hold senior management positions result in issues relating to education quality receiving inadequate attention? Further, as we will see in the next article in this series, the non-executive and independent directors on the board over the years also lacked experience in the education industry.
With CHS being the controlling shareholder, Chairman and CEO at REC, and also controlling shareholder and Non-Executive Chairman at Catalist-listed Sitra, is he spending enough time at REC? Since Sitra acquired a majority stake in a company owned by CHS’s spouse and son, it is hoped that his family members who are involved at REC are not also involved in management roles at Sitra and other non-REC businesses, since they hold important management positions at REC and are paid by REC.
In the next article, I will look at the board of directors and remuneration issues.
Endnotes
[1] Raffles Education Corporation Limited. (n.d.). Annual Report 2019. Retrieved from https://raffles.education/images/Investor/AnnualReport/REC_AR2019.pdf
[2] World Branding Awards. (n.d.). Raffles Education Corporation Limited. Retrieved from https://awards.brandingforum.org/brands/raffles-education/
[3] Raffles Education Corporation Limited. (n.d.). Homepage. Retrieved from https://raffles.education
[4] Raffles Education Corporation Limited. (n.d.). Corporate information – Milestones. Retrieved from https://raffles.education/Corporate_Info_Milestones.html
[5] Raffles Education Corporation Limited. (n.d.). Annual Report 2019. Retrieved from https://raffles.education/images/Investor/AnnualReport/REC_AR2019.pdf
[6] Liu, J. (2008, September 24). No job, so he became the boss. AsiaOne. Retrieved from https://www.asiaone.com/News/Education/Story/A1Story20080921-89077.html
[7] Raffles Education Corporation Limited. (2018, October 27). Company’s response to SIAS queries. Retrieved from https://links.sgx.com/FileOpen/Reply%20to%20SIAS%20Queries%2027%20Oct%202018.ashx?App=Announcement&FileID=531170
[8] Ibid.
[9] Raffles Education Corporation Limited. (2018, January 19). Appointment of assistant vice president. Retrieved from https://links.sgx.com/1.0.0/corporate-announcements/0T31LTQ5OXMTZAQ5/7d07062a53de6cc4db630c21b0f80722cca41cf83f300efcc95535de7881f3c5
[10] Raffles Education Corporation Limited. (n.d.). Annual Report 2020. Retrieved from https://raffles.education/images/Investor/AnnualReport/REC-AR2020.pdf
[11] Sitra Holdings (International) Limited. (n.d.). Annual Report 2020. Retrieved from https://links.sgx.com/FileOpen/Sitra_Annual%20Report%202020.ashx?App=Announcement&FileID=661165
[12] Ibid.
[13] Midas Holdings Limited. (2018, February 9). Request for suspension. Retrieved from https://links.sgx.com/1.0.0/corporate-announcements/0CUNDS4KV8KV3WBU/68e5639a510988e879a9cce10e1c1f5814afe7743fc278f9ba91d31ab462e864
[14] Shiao, V. (2018, March 22). Patrick Chew resigns as Midas Holdings CEO due to health issues and litigation matters. The Business Times. Retrieved from https://www.businesstimes.com.sg/companies-markets/patrick-chew-resigns-as-midas-holdings-ceo-due-to-health-issues-and-litigation
[15] Tan, A. (2018, May 28). Mazars faces possible actions by Acra over Midas auditing. The Business Times. Retrieved from https://bschool.nus.edu.sg/images/CGIO/2018-NewsClippings/28May2018MazarsfacesactionsAcraauditing_LawrenceLoh.pdf
[16] Ibid.
[17] Forbes. (n.d.). Singapore’s 40 Richest: #12 Chew Hua Seng. Retrieved from https://www.forbes.com/lists/2008/79/biz_singaporerichest08_Chew-Hua-Seng_QLVW.html
[18] Details on the Midas case can be found in the case study titled “Midas: All that Glitters is not Gold” in Corporate Governance Case Studies Volume 8, published by CPA Australia Ltd. Retrieved from https://www.cpaaustralia.com.au/-/media/project/cpa/corporate/documents/tools-and-resources/ethics/cg-vol-8.pdf?rev=f5c600d33e444601982dba3ea4d6f8f7&download=true
[19] Kompa, J. (2017, June 11). How unregulated for-profits degrade higher education: The case of Raffles Education Corporation. Retrieved from https://joanakompa.com/2017/06/11/how-unregulated-for-profits-degrade-higher-education/
[20] Ibid.
[21] Ibid.
[22] https://www.glassdoor.sg/Reviews/Raffles-Education-Corp-Reviews-E568702.htm?filter.iso3Language=eng
[23] Raffles Education Corporation Limited. (2018, October 27). Company’s response to SIAS queries. Retrieved from https://links.sgx.com/FileOpen/Reply%20to%20SIAS%20Queries%2027%20Oct%202018.ashx?App=Announcement&FileID=531170
[24] Raffles Education Corporation Limited. (n.d.). Annual Report 2019. Retrieved from https://raffles.education/images/Investor/AnnualReport/REC_AR2019.pdf
[25] Raffles Education Corporation Limited. (2018, October 27). Company’s response to SIAS queries. Retrieved from https://links.sgx.com/FileOpen/Reply%20to%20SIAS%20Queries%2027%20Oct%202018.ashx?App=Announcement&FileID=531170
[26] Leow, S. W. (2010, June 5). Thailand acts against Raffles Design school. AsiaOne. Retrieved from https://www.asiaone.com/News/Education/Story/A1Story20100603-219992.html
[27] Kompa, J. (2017, June 11). How unregulated for-profits degrade higher education: The case of Raffles Education Corporation. Retrieved from https://joanakompa.com/2017/06/11/how-unregulated-for-profits-degrade-higher-education/
[28] Kannangara, N. (2013, June 16). Raffles Colombo Misleading Students!. The Sunday Leader. Retrieved from http://www.thesundayleader.lk/2013/06/16/raffles-colombo-misleading-students/
[29] The Sunday Leader. (2013, June 23). Raffles Responds To The Sunday Leader Article. Retrieved from http://www.thesundayleader.lk/2013/06/23/raffles-responds-to-the-sunday-leader-article/
[30] Ibid.
[31] Ibid.
[32] Ibid.
[33] Parliament of Australia. (n.d.). Question on notice – supplementary budget estimates 2015 – 2016. Retrieved from https://www.aph.gov.au/~/media/Committees/eet_ctte/estimates/supp_1516/Education/Answers/SQ15-000784.pdf
[34] Raffles College Pty Ltd v Tertiary Education Quality Standards Agency [2015]. Retrieved from https://joanakompa.files.wordpress.com/2017/06/federal-court2015fca0734.pdf
[35] Raffles Education Corporation Limited. (2017, October 11). Response to queries by Securities Investors Association (Singapore) (“SIAS”) on the annual report for the financial year ended 30 June 2017. Retrieved from https://sias.org.sg/media/qareport/1507771301_REC_Announcement_Reply-to-SIAS-Queries-on-AR2017-11Oct2017.pdf
[36] Raffles Education Corporation Limited. (n.d.). Annual Report 2017. Retrieved from https://raffles.education/images/Investor/AnnualReport/Raffles-AR2017.pdf
[37] Raffles Education Corporation Limited. (2017, October 11). Response to queries by Securities Investors Association (Singapore) (“SIAS”) on the annual report for the financial year ended 30 June 2017. Retrieved from https://sias.org.sg/media/qareport/1507771301_REC_Announcement_Reply-to-SIAS-Queries-on-AR2017-11Oct2017.pdf
[38] Tertiary Education Quality and Standard Agency. (2018, November 26). Raffles College applies to withdraw registration. Retrieved from https://www.teqsa.gov.au/latest-news/articles/raffles-college-applies-withdraw-registration
[39] Tertiary Education Quality and Standard Agency. (2018, December 20). Raffles College Pty Ltd: Withdraw registration. Retrieved from https://www.teqsa.gov.au/national-register/condition-decision/withdraw-registration-20-december-2018
