A Corporate Governance Breach At Sing-post Case Solution
Company Background
Sing-post started its operations as a mail office, after Singapore’s independence in the year 1966. Till March 2007, the company enjoyed its exclusive rights for delivering and collecting the postcards and letters, but with the passage of time; the industry got filled with new entrants, which increased the competition.
In addition, the Signpost’s financial performance was also impacted by the global trends, as the internet based services of postal mails and emails started rising in the market. More specifically, the market for the stamped mail dropped from 180 million units to 130 million units over the period 2002-2011. As a result of which, Sing-post hired a new CEO Baier, who put his efforts in transforming the organization’s business strategy, which was mainly focused on five different segments, including: e-commerce, mail, retail and financial services, logistics and digital services. The strategy turned out to be a success factor for Sing-post, as its sales revenue increased from $666 million to $0.8 billion over a year. The success mainly contributed to the acquisition made in e-commerce segment. Appendix 1 shows the company’s performance over the period of the 5 years, after the adoption new business strategy.
Corporate Governance Issues
The public outcry and the shareholders’ mistrust over Sing-post mainly resulted because of the corporate governance breach made buy the company’s board of directors in the Singapore Stock Exchange announcements. The main problem was the unreported disclosure related to 2013’s acquisition.
Improper Administrative Oversights in Public Disclosures
The corporate governance chronicle started back in 205, as the company’s CEO – Wolfgang Baier resigned from the company suddenly. Just a few weeks later, it was announced by Sing-post that it had not disclosed the involvement of its independent director in the 2013’s acquisition, due to an administrative oversight. The business solely relied on the decision of the company’s Board of Directors, and the BODs at Sing-post were merely involved in doing business without the implementation and structuring of the corporate governance standards. Such carelessness caused mistrust and outrage among the general public as well as the company’s shareholders.
Large & Unskilled BODs
By the end of fiscal year 2015; the company’s BODs comprised a total of twelve directors, who used to meet frequently in order to decide the company’s strategic objectives and financial performance. The board size was relatively larger than other key players in the industry. Moreover, as the industry’s trends had shifted from postal mail s to the internet based communication; the company had majority of its director who were 70 years old or above, The auditing committee questioned the skills of the board with the ongoing trends in the industry, as the board members needed to be changed, as claimed by the former Chief Executive Officer.
Poor Mergers &Acquisitions Evaluation
The company did not have proper policies and procedures for the approval and evaluation of the mergers and the acquisitions. All of the decision based guidelines were coming from the internal members of Board of Directors, whose skills were questionable and irrelevant to the shifting standards within the postal industry. One of the corporate governance specialist commented that the company had poor governance in disclosures, announcements, and mergers & acquisition related decisions. He believed that it wasthe responsibility of the whole board to formalize and implement the corporate governance standards within the organization.A sit believed that the board was only focused on achieving the targeted financial performance, which had a direct relationship with a good corporate governance (neglected by the Board).
Independent Directors
The question had raised over the independent nature of the directors, who actually hadinterest in SCCL (Sterling Coleman Capital Limited). Although the SCCL was the financial advisor appointed by the company in its three acquisitions, but the information regarding the independent director’s stake was kept undisclosed. Moreover, the directors’ credibility remained questionable, as all of the executive committees were held 14 times during a fiscal year. These directors had frequent meeting with the young Chief Executive Officer, which further raised questions over the independent directors’ independence.
Information Sharing
One of a key aspect in a good corporate governance is to provide all the relevant information related to the legal, internal, social and contractual factors and obligations to different stakeholders, but the company had failed to comply with such key of corporate governance, as it did not disclose the independent director’s interest in 2013’s acquisition and even after the public outcry; it did not even try to change the announcement...........................
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