By Mak Yuen Teen
I have revised and added to the questions for Telechoice’s coming AGM and sent them to the company. Here they are.
Question 1:
I refer to Resolutions 6 and 7 that pertain to the re-election of Mr Adrian Chan Pengee (Mr Chan) and Ms Jennifer Duong Young (Ms Young). These two directors were appointed to the Board on 24 April 2024, the same day that the company held its 2024 AGM. Their appointments were announced on 22 April 2024.
Can the Board please explain why they were appointed last year without being re-elected at last year’s AGM? Why did the Board not plan their appointments such that they could be elected at last year’s AGM?
As a result, they served a full year without having been properly elected by shareholders at last year’s AGM.
I note that an independent director resigned on 31 December 2023 (after serving just one year) and a non-independent non-executive director retired at the 2024 AGM after serving 9 years. There do not appear to be any reasons why Mr Chan’s and Ms Young’s appointments could not have been planned such that they could have been elected at last year’s AGM.
Question 2:
I note that Mr Shailesh Anand Ganu was appointed to the Board as an independent director on 7 July 2023 and re-elected at the 2024 AGM. Mr Ganu and Mr Chan are both current council members of the Singapore Institute of Directors (SID) with Mr Chan being a Vice Chairman of SID.
(a) Can the Board please disclose whether Mr Ganu recommended Mr Chan’s appointment to the Board?
(b) Further, Ms Young was recently appointed to the City Developments Ltd’s Board under highly controversial circumstances without going through CDL’s Nominating Committee, together with Ms Wong Su Yen, who was the immediate past Chairman of SID. Can the Board please explain whether Mr Ganu recommended Ms Young’s appointment to the Board?
Question 3:
Can the Board please disclose the search and nominating process for directors at the company, including how the requisite skills and experience for the Board are identified, how directors are sourced, and the process for assessing their suitability, including due diligence that is done?
Question 4:
In recent years, the Board had 7 to 8 directors (8 after the new CEO was appointed as an Executive Director, unlike the former CEO who was not an Executive Director), with no director with a legal background.
(a) Given that the company is struggling financially and is seeking to renew, rebuild and transform, can the Board please explain why there is a need to increase the size of the Board and to add a lawyer to it?
(b) How does the Board see Mr Chan’s background as helping in the company’s renewal, rebuilding and transformation? Please disclose the Board’s desired skills matrix and how Board assessed Mr Chan’s background against the desired skills matrix.
Question 5:
I note that the company has disclosed that Lee & Lee provides corporate secretarial and legal services to the group and Mr Chan is a Senior Partner of Lee & Lee. Notwithstanding the business relationship between Lee & Lee and the group, the Board has considered him as independent, and provided standard explanations used by many other companies. Mr Chan also serves on 4 other listed boards and has several other principal commitments.
(a) Under Provision 4.4 of the Code of Corporate Governance, if the Board, having taken into account the views of the NC, determines that directors are independent notwithstanding the existence of relationships set out in Provision 2.1, the company should disclose the relationships and its reasons in the annual report. Footnote 14 of the Code states that such relationships include the kind of relationship which Mr Chan has with the company. Under Practice Guidance 2 to the Code, a director is deemed to be non-independent where there are significant payments or material services provided, in this case by Lee & Lee, to the company. The amount and nature of the service, and whether it is provided on a one-off or recurring basis, are relevant in determining whether the service provided is material. As a guide, payments aggregated over any financial year in excess of S$200,000 should generally be deemed significant irrespective of whether they constitute a significant portion of the revenue of the organisation in question.
Given the Code Provision and Practice Guidance, can the Board please disclose:
(i) how long Lee & Lee has been providing corporate secretarial and legal services to the group;
(ii) the amount that Lee & Lee has been paid for such services in FY2024 and for the previous four years; and
(iii) the nature of the corporate secretarial and legal services provided, and specifically whether it includes advising on compliance with the Code of Corporate Governance, including relating to providing any opinion on whether Mr Chan should be considered independent.
This is to assist shareholders to assess whether the payments are significant and whether the services are material, and whether Lee & Lee has provided any opinion related to the assessment of the independence of its own partner.
(b) Given the business relationship and Mr Chan’s many commitments, please explain why the NRC and Board did not consider other candidates to appoint to the Board, given the large pool of potential candidates available in the market?
Question 6:
Mr Chan is the Chairman of the Audit Committee (AC). However, he is a lawyer by profession. The Singapore Code of Corporate Governance states that the AC should have a majority of directors, including the Chairman, with recent and relevant accounting or related financial management expertise or experience. The company has claimed compliance with the Code by stating: “Whilst the Chairman of our AC is a lawyer by training, he has significant accounting/financial management knowledge and experience taking into account, among other things: (a) his background as a corporate lawyer for 35 years, and as the Head of Corporate Department and Senior Partner at Lee & Lee; (b) that he has been a director on the boards of many listed companies and other entities over many years; and (c) that he has been a director on the boards of many listed companies and had previously served as chairman on some of them, including as Chairman, Audit and Risk Management Committee of the Accounting and Corporate Regulatory Authority and Chairman, Audit and Risk Committee of Ascendas Funds Management (S) Limited (as manager of Ascendas REIT).
These are not the criteria for assessing recent and relevant accounting or related financial management expertise or experience under the Guidebook for Audit Committees in Singapore or under the Audit Committee Guide issued by SID, where Mr Chan is Vice Chairman.
(a) Can the Board please confirm that Mr Chan has, as per the Audit Committee Guide, amongst other things, substantively the following qualities?
- The ability to understand and assess the general application of local and other generally accepted accounting principles
- The ability to ask pertinent questions about the company’s financial reporting process
- The ability to effectively challenge Management’s assertions on financials and Management’s responses when appropriate
- The ability to understand internal controls and risk factors relevant to the company’s operations, including those relation to information technology, treasury operations, industry, financial derivatives, etc.
- Experience gained through executive responsibility for a sizeable business including having or have had responsibility for the finance function, such as being or having been a CEO, CFO or other senior officer with financial oversight responsibilities
- Education or professional qualifications relating substantially to accounting or finance
- Experience of working within the areas of corporate finance, financial reporting or accounting
(b) Can the Board please explain why it did not consider appointing a director with more recent and relevant accounting or related financial management expertise or experience to lead a committee whose responsibilities are primarily relating to oversight of financial reporting, internal controls, risk management, internal audit and external audit?
(c) Can the board please confirm that Mr Chan would be able to substantially answer questions relating to these matters at the AGM if asked by shareholders?
Question 7:
With effect from 5 December 2023, the company has been placed on the SGX Watch-list, having recorded three consecutive years of pre-tax losses and a market capitalisation below $40 million over the six months prior.
In light of the poor performance of the company, can the Board please explain why the Board made the decision that the Chairman, Mr Ronald Seah, should be re-designated as a non-independent non-executive director after reaching the tenure limit of 9 years for an independent director, rather than appoint a new Board Chair to help steer the company through its renewal, rebuilding and transformation, and to improve the company’s performance?
I note that he has served on the board since 3 May 2012 and as Chairman since 30 June 2020.
Question 8:
Can the Board please explain what measures it is considering to improve the financial performance of the company and to help the company exit the watchlist?
_________________
Disclosure: I hold 1,000 shares in Telechoice.
