A Corporate Governance Breach at Singpost

SMU Classification: Restricted
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SMU173
A CORPORATE GOVERNANCE BREACH AT SINGPOST

My immediate priorities are to lead the board through the completion of the corporate
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governance review, review board composition and appoint a new Group chief executive.
- Simon Israel, Chairman Appointee, SingPost1
On 5 May 2016, Singapore Post Limited (“SingPost”) announced the appointment of Simon Israel,
the chairman of Singapore’s telecommunications giant, Singtel, as the non-independent chairman of
SingPost. With this appointment, SingPost hoped that it had taken a step forward in reassuring its
stakeholders, who had been stunned at the corporate governance lapses revealed by the company
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over the past six months.
With a heritage dating back to 1819, SingPost was Singapore's designated Public Postal Licensee,
providing domestic and international postal services. In May 2003, the company was listed on the
mainboard of the Singapore Exchange2, and continued to perform well, remaining profitable over the
years. Shareholders were generally pleased with the company: the firm’s market capitalisation had
increased from S$1.14 billion (US$0.83 billion3) at the time of its IPO in 2003 to S$3.53 billion
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(US$2.56 billion) as at 31 March 2016, with total shareholder returns amounting to 323.2% over the
period.4
However, in December 2015, a corporate governance saga began to unfold in the company. Earlier
in the month, on 10 December, SingPost’s group chief executive officer, Wolfgang Baier, resigned
quite suddenly, to “pursue new endeavours”.5 A couple of weeks later, on 22 December, SingPost
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announced that due to an ‘administrative oversight’, it had, in an SGX announcement on 18 July

2014, not disclosed lead independent director Keith Tay’s interest in a 2013 acquisition. Tay was
non-executive Chairman and held a 34.5 percent stake in corporate finance adviser Stirling Coleman,
which had acted for the sellers in the acquisition.6 The announcement added that Tay had, however,
abstained from all voting by the board in relation to the buyout.
In the face of a public outcry, SingPost decided to have a special audit conducted to examine the
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conflict of interest issues surrounding the acquisition. As the shareholders questioned the
independence of PwC, which had been SingPost's external auditor since it listed in 2003, the
company also appointed law firm Drew and Napier as a joint special auditor. In addition, it appointed
1
“SingPost Announces New Chairman”, SingPost Press Release, May 5, 2016,
http://www.singpost.com/download/FinancialNews/Announcements/2016/ann20160505.pdf, accessed May 2016.
2
SingPost, “Corporate Information”, http://www.singpost.com/corporate-information/history.html, accessed May 2016.
3
US$1= SG$1.38 as at May 24, 2016, www.xe.com. Unless stated otherwise, this conversion rate has been used through the case.
4
“Singpost Chairman to Step Down at the AGM in July 2016”, SingPost News release, April 1, 2016, http://www.singpost.com/media-
centre/news-releases/...2016.html, accessed May 2016.
5
“Singpost Group Ceo, Dr Wolfgang Baier resigns”, SingPost News release, December 10, 2015, http://www.singpost.com/media-
Do
centre/news-releases/632-singpost-group-ceo-dr-wolfgang-baier-resigns.html, accessed May 2016.

6
“Director at Centre of SingPost Saga Steps Down”, The Straits Times, April 10, 2016,
http://www.straitstimes.com/business/companies-markets/director-at-centre-of-singpost-saga-steps-down, accessed May 2016.
This case was written by Professor Gennaro Bernile, Havovi Joshi and Vinika D. Rao at the Singapore Management University.
The case was prepared solely to provide material for class discussion. The authors do not intend to illustrate either effective
or ineffective handling of a managerial situation. The authors may have disguised certain names and other identifying
information to protect confidentiality.
Copyright © 2017, Singapore Management University Version: 2017-02-10
This document is authorized for educator review use only by Choirunnisa Arifa, Gadjah Mada University until Nov 2020. Copying or posting is an infringement of copyright.
Permissions@hbsp.harvard.edu or 617.783.7860
SMU-16-0028 A Corporate Governance Breach at SingPost
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leadership firm Heidrick & Struggles as an independent consultant to undertake a larger company-
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wide corporate governance review.7
Before the special audit report could be released, there was further upheaval at the company. On 1
April 2016, SingPost’s chairman, Lim Ho Kee, announced his intention to step down. Lim had been
SingPost’s chairman since its IPO in 2003, and commented that the “issue of board renewal has been
on my mind for the last few years”.8 Accepting his decision, the board unanimously agreed to appoint
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board member Professor Low Teck Seng as Chairman. However, just six days later, on April 7, Low
issued a statement declining the role, stating that he wanted to focus on his “principal commitment”
as the chief executive of Singapore’s National Research Foundation. And the very next day, Tay
announced his decision to also step down from the Board, after two decades as a board member.
On 3 May 2016, SingPost released the executive summary of the special audit report to the public. It
was stated therein that Tay was “arguably in breach of section 156(1) of the Companies Act for not
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declaring his interest in a 2013 acquisition of Famous Holdings as soon as practicable. In addition,
he had breached some fiduciary duties relating to the Famous deal and SingPost's acquisition of
Famous Pacific Shipping (NZ) in 2015, which came under the Companies Act.” 9 The report
mentioned that the omission appeared to not have been deliberate. It also stated that “SingPost had
no standard processes for evaluating acquisitions or for directors to disclose conflicts of interest”.10
Regulators and shareholders alike expressed grave concern at the contents of the special audit report.
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Mak Yuen Teen, corporate governance specialist, associate professor at the National University of
Singapore and a shareholder in SingPost, observed in a letter to the Business Times,
I am astounded by the poor corporate governance in SingPost in the areas of evaluation and
approval of mergers and acquisitions, disclosure of interest and announcements. The
responsibility for this rests with the entire board. Perhaps the board of SingPost became so
focused on doing business that it forgot that this must be underpinned by good corporate
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governance.11
With Israel’s appointment, SingPost would be hoping to take another step in winning back its
stakeholders’ confidence. But was this enough? What else did the postal giant have to do to ensure
that its corporate governance standards and mechanisms were considered truly effective? Was this a
case of overzealous shareholders hauling a revered corporate institution over the coals for what was
just an administrative breach? And what would be the larger ramifications of SingPost’s lapses on
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the corporate governance environment in Singapore, a country that prided itself on both the efficacy
of its regulatory environment and ease of doing business?
SingPost Corporate Profile
7
Ibid.
8
Singpost Chairman to Step Down at the AGM in July 2016, SingPost News release, April 1, 2016, http://www.singpost.com/media-
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centre/news-releases/641-singpost-chairman-to-step-down-at-the-agm-in-july-2016.html, accessed May 2016.

9
Melissa Tan, “SingPost Special Audit Findings May Lead to Regulatory Action”, The Business Times, May 10, 2016,
http://www.businesstimes.com.sg/companies-markets/singpost...action, accessed May 2016.
10
Ibid.
11
Mak Yuen Teen, “SingPost Special Audit Report Should Reveal Full Methodology”, Governance for Stakeholders, May 8, 2016,
http://governanceforstakeholders.com/2016/05/08/singpost... methodology/, accessed May 2016.
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Following Singapore’s independence in 1965, SingPost, which had started as a small mail office in
1819, was admitted to the Universal Postal Union (UPU) in January 1966. The Singapore Postal
Services Department became a fully autonomous body on 1 January 1967. In 1982, the Postal
Services Department merged with the then Telecommunication Authority of Singapore (Telecoms).
Ten years later, in 1992, Telecoms was split into three entities: the reconstituted Telecommunication
Authority of Singapore (TAS), Singtel and SingPost.12
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On 13 May 2003, SingPost did an IPO and was listed on the mainboard of the Singapore Exchange
(SGX). It subsequently became a constituent stock of various main benchmark indices - FTSE All-
World Index Series, FTSE All-World Minimum Variance Index, FTSE All-World High Dividend
Yield Index, FTSE RAFI Index Series, FTSE Global Infrastructure Index Series and FTSE ST Index
Series.13
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Business
SingPost had been given exclusive rights to receive, collect and deliver letters and postcards until
March 2007.14 With new entrants into the once exclusive postal markets, competition increased.
Global trends too had the potential to severely impact SingPost’s performance. With the rise in
Internet-based services such as email, postal mail was on the decline. In fact, stamped mail, mostly
from private individual customers, reduced from 180 million units in 2002 to 130 million units in
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2011.15
SingPost recognised that adapting to these new economic conditions was critical to the survival of a
modern postal service, and had appointed Baier as its group CEO in October 2011 to manage this
transformation. One month later, Baier had initiated the RTF Programme, a 30-month strategy to
increase service volume by expanding into a regional network through acquisition and investment in
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more efficient infrastructure, IT, and talent. The strategy was based on investing and acquiring along
five different ‘pillars’ - mail, digital services, logistics, e-commerce and retail, and financial services
- to increase revenue and fill the void left by declining mail. An important element of this programme
was inorganic growth through acquisitions into new services and markets.16
The strategy appeared to have worked well, and for the financial year ending 31 March 2016,
SingPost’s annual revenue had increased to S$1.15 billion (US$0.8 billion) from S$920 million
(US$666 million) in the previous year. This was attributed largely to e-commerce related growth and
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acquisitions. The company also achieved a record full year net profit of S$248.9 million (US$180
million), although underlying net profit dropped by 4% over the previous year to S$153.6 million
(US$111 million), on account of loss of income from a mall redevelopment, and divestment of stake
and deconsolidation of subsidiary companies, DataPost & Novation Solutions (refer to Exhibit 1 for
12
SingPost, “Corporate Information”, http://www.singpost.com/corporate-information/history.html, accessed May 2016.
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13
Ibid.
14
centre/news-releases/641... 2016.html, accessed May 2016.
15
This section has been excerpted from: Reddi, K. and Joshi, H. “Singapore Post: Transforming Mail Services in the Internet Age”,
June 2013, http://casewriting.smu.edu.sg/case/singapore-post-transforming-mail-services-internet-age, accessed May 2016.
16
Ibid.
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details on the past five year financial performance).17
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The firm’s market capitalisation as at 31 March 2016 was S$3.53 billion (US$2.56 billion), with total
shareholder returns until then amounting to 323.2% from the IPO in 2003.18
Corporate Profile
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The two large institutional shareholders of SingPost were Singtel and Alibaba Investment Limited,
with approximately 23% and 10% stakes respectively in the company. Institutional shareholders
made up another 33% of the company’s investor groups, while retail investors were at 30%, and
others at 4%.19
As at May 2016, the company had a credit rating of ’A-/Stable’ by Standard & Poor’s.
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Board of Directors
At the end of financial year 2015, SingPost’s board comprised 12 directors (refer to Exhibit 2 for
additional details on each director). This was a relatively large board compared to other companies
in a similar business segment across the globe.20 Of the 12 directors, eight were independent, and
other than Baier, all were non-executive directors.
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Three of these directors, namely Lim Ho Kee (the chairman), Tan Yam Pin and Keith Tay Ah Kee,
had spent over nine years on the board. Lim and Tay had first been appointed directors in April 1998,
while Tan came on the board in February 2005. The tenure of these directors had in fact prompted
Mak Yuen Teen to raise a question via email to SingPost’s Investor Relations in June 2015 (prior to
the company’s Annual General Meeting) that,
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The board has added new independent directors in recent years who appear to be well qualified,
given the nature of SingPost’s business. However, there are a number of long-serving
independent directors, some of whom have served on the board for almost 20 years. They are
also more than 70 years of age. Given the change in the business of SingPost, do these directors
have the necessary skills and competencies for the new strategies that SingPost is pursuing?21
SingPost though had a credible response in that it had appointed board advisory services provider
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Egon Zehnder for two years running to ensure that these directors were indeed independent. And
during their confidential interviews with Egon Zehnder, all directors had confirmed that they believed
the three directors were truly independent in their thinking and behaviour.22
In terms of frequency of board meetings, the board met at least quarterly to review and approve the
17
SingPost, “Q4 & FY2015/16 Financial Results”, 10 May 2016,
http://www.singpost.com/download/AboutSingPost/SGXAnnouncement/2015Q4/PresentationSlides.pdf, accessed May 2016.
18
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centre/news-releases/641...2016.html, accessed May 2016.

19
SingPost, 2015 Annual Report, http://www.singpost.com/download/ar201415.pdf, accessed May 2016.
20
Mak Yuen Teen, “Corporate Governance Concerns at SingPost”, The Business Times, December 15, 2015,
http://www.businesstimes.com.sg/companies... singpost, accessed May 2016.
21
Ibid.
22
SingPost, 2015 Annual Report, http://www.singpost.com/download/ar201415.pdf, accessed May 2016.
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release of the Group’s quarterly results, as well as discuss and resolve all matters requiring its
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approval. Additionally, towards the end of each financial year, the board participated in a strategy
workshop with management to plan the Group’s longer-term strategy.23
Board Committees
SingPost’s board had also established Committees, each of which had written terms of reference that
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set out its respective authority and duties (refer to Exhibit 3 for further details on the Board
Committees).
For the financial year ending 31 March 2015, the Board had met seven times—however, the
Nominations Committee had met thrice, the Compensation Committee once, and the Audit
Committee and the Board Risk and Technology Committee had met four times each. The Executive
Committee, though, had met 14 times during the year – which had prompted Mak to enquire in June
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2015,
SingPost has an executive committee which met 14 times during the year, and with due respect,
a relatively young CEO. Why is it necessary to have an executive committee which meets so often
and is the executive committee managing the company together with the CEO? If so, should the
independent directors on the executive committee still be considered independent?24
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Corporate Governance Challenges: How the Story Unfolded
In November 2015, SingPost had been named as one of the top 50 ASEAN publicly-listed companies
based on the ASEAN Corporate Governance Scorecard. It had also won one of the two outstanding
achievement awards per country, given to companies that were outside the top three in that country.25
But just a month after these accolades, disturbing facts began to surface.
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The genesis of the problem went back to January 2013, when SingPost purchased a 62.5% equity
stake in Famous Holdings Pte Ltd (FH) for S$60 million (US$49.2 million26), which then became a
subsidiary of SingPost. Thereafter, in July 2014, SingPost, through FHPL, purchased a 100% equity
stake in F.S. Mackenzie Limited (FSM); and in January 2015 (again through FHPL), it purchased a
90% equity stake in Famous Pacific Shipping (New Zealand) Limited (FPSNZ). All these three
companies - FHPL, FSM and FPSNZ - had appointed Stirling Coleman Capital Limited (SCCL) as
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a financial advisor in regard to these acquisitions.
Tay, the lead independent board director at SingPost, was the non-executive Chairman and a 34.5%
shareholder of SCCL - a fact that SingPost did not mention in its public announcement about the
FSM acquisition posted on the Singapore Exchange (SGX) website in July 2014, stating instead that
none of its directors had an interest in the acquisition.
In the finger-pointing drama that ensued once this omission became public, SingPost appointed
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23
Ibid.
24
Mak Yuen Teen, “Corporate Governance Concerns at SingPost”, The Business Times, December 15, 2015,
http://www.businesstimes.com.sg/companies-markets/corporate...singpost, accessed May 2016.
25
Ibid.
26
US$1=S$1.22 as at January 2013, www.xe.com.
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special auditors Drew & Napier and PwC on 23 December 2015 to review what had transpired. The
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firms released their findings in a Special Audit Report on 3 May 2016, which highlighted some key
aspects:27
 Tay was not involved in the daily operations of SCCL and did not represent SingPost or FHPL
in any negotiations with SCCL or the vendors in any of the Famous acquisitions.
 SingPost had no set policy or procedures for the evaluation and approval of M&A
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transactions but relied on “broad internal guidelines as well as the work experience of its
members” – these guidelines were not flouted in the Famous Acquisitions.
 Tay had expressly indicated his involvement in SCCL to the Board and abstained from voting
on the acquisition accordingly.
 SingPost was not obliged to disclose Tay’s interest in the Famous acquisitions under the SGX
Listing Manual-Mainboard Rules. However, stating that none of its directors had an interest
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in Famous was clearly an error. The error was attributed to “carelessness” rather than an
intent to deliberately conceal Tay’s interest in the FSM acquisition.
Media reports highlighted that SingPost allegedly decided not to act to correct the omission on the
advice of their external lawyers, Rodyk & Davidson, who later stated that their advice would have
been different if they had “read the incorrect announcement”.28
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The Special Auditor’s report summary also stated that the erroneous announcement notwithstanding,
“there is no suggestion that Mr Tay's vote influenced or otherwise affected the eventual approval of
(the) acquisitions”.29
In a statement through his lawyers on May 3, 2016, Tay stated,

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While there are some factual findings in the report that I disagree with completely, they do not
detract from the key point - nothing I did caused the non-disclosures in relation to the acquisition
of F.S. Mackenzie and Famous Pacific.30
SingPost announced that it accepted the recommendations of the auditors and would implement them
as part of a “broader Corporate Governance Review presently underway”.31
While the disclosure lapses were undeniable, the jury was out on where the blame should be laid.
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Most importantly, as the facts that were omitted had apparently no real impact on the actual decisions
made regarding the acquisition of the two freight forwarders and the price paid for them, how serious
were these lapses? Had a major governance crisis been averted? Or was this a storm in a teacup
instigated by clever media reporting and vocal activist shareholders who were oversensitive to any
hints of board wrongdoing?
27
PwC and Drew & Napier, “Singapore Post Limited: Release of the Special Audit Report”, May 3, 2016,
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http://infopub.sgx.com/FileOpen/SGXAnn.ashx?App=Announcement&FileID=402769, accessed May 2016.

28
Marissa Lee, “Disclosure Lapses Did Not Affect SingPost's Investment Decisions, Say Special Auditors”, The Straits Times, May 3,
2016, http://www.straitstimes.com/business/disclosure... auditors, accessed May 2016.
29
Ibid.
30
Ibid.
31
Ibid.
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A Regulatory Lapse?
Taking into account factors including business licensing, taxes, credit legal rights and investor
protection, The World Bank had reported Singapore as “about the most business-friendly regulation
in the world”.32 The city state’s institutional environment, judicial system, levels of transparency and
corporate governance practices had made it popular with domestic and global investors – bringing it
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many other global accolades including Asia’s top financial centre (Global Financial Centres Index
2016) and the best business environment in Asia Pacific and worldwide for 2015-19 (Economist
Intelligence Unit, Country Forecasts, May 2015).33.
The environment was thus zealously protected by the country’s regulatory authorities, who kept a
watchful eye on the proceedings at SingPost and were quick to weigh in with their opinions once the
Special Audit report was released.
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Beside the direct ramifications for Tay, there were possible consequences for the other directors on
SingPost’s board, who could also be held accountable for the disclosure errors under the Securities
and Futures Act (SFA) or the Companies Act. SFA fell under the purview of Singapore’s central bank,
the Monetary Authority of Singapore (MAS), while the Companies Act was under the purview of the
Accounting and Corporate Regulatory Authority (ACRA).
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A spokesperson from MAS said that, “as a matter of policy, MAS does not comment on our dealings
with individual parties… [but] neither will we hesitate to take appropriate action against any
individual or entity that flouts any legislation under MAS' purview.”34 In the same vein, an ACRA
spokesperson said that it would work with the relevant agencies to assess if any regulatory action was
warranted.35
The Singapore Stock Exchange (SGX) mentioned that it was reviewing the Report and added, “We
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will take disciplinary action for any breaches of the listing rules and refer breaches to the relevant
authorities, if necessary.” The SGX spokesperson also highlighted Section 156 of the Companies Act
and stated,
The board of a company is ultimately responsible for the announcements made by the company
and must not abdicate its responsibility to any professionals especially where matters under
consideration are not subjective but factual in nature. A company and its board must exercise
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due care in drafting, reviewing and approving SGXNet announcements. Any error must be
promptly escalated to the board's attention for its deliberation and decision.36
SingPost’s board members countered with the following statement,
32
Monetary Authority of Singapore, “Value Propositions”, http://www.mas.gov.sg/singapore-financial-centre/value-
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propositions/conducive-pro-business-environment.aspx, accessed May 2016.

33
Ibid.
34
Melissa Tan, “SingPost Special Audit Findings May Lead to Regulatory Action”, The Business Times, May 10, 2016,
http://www.businesstimes.com.sg/companies-markets/singpost...action, accessed May 2016.
35
Ibid
36
Ibid.
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As Directors of SingPost, we hold ourselves to the highest standards befitting the quality of
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SingPost, in the best long-term interests of SingPost and its shareholders. The investments into
FHPL, FSM and FPSNZ are strategic to SingPost as they are part of our internationalisation
strategy to build an industry-leading end-to-end eCommerce logistics network, across
geographies. They have proven to be sound decisions, grounded in competitive and value adding
advantage to advance SingPost's goal to become world-class.37
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No smoke without fire?
A closer analysis of the financials behind the original acquisition of FHPL threw up some facts.
 On 18 January 201338, SingPost announced the acquisition of 62.5% of FHPL for S$60
million (US$50 million39), with an option to acquire the balance 37.5% for up to S$50 million
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(US$40 million) by 31 Dec 2015 in cash or cash and stock, valuing the deal at a maximum
of S$110 million (US$90 million) for 100% of FHPL.
 On Feb 20, 2013, the deal was announced as closed for a total consideration of S$89.5 million
(US$73 million). This was structured as follows:
o Cash paid: S$60 million (US$50 million)
o Contingent consideration: S$29.5 million (US$25 million)
 At the time of acquisition, the position of the assets and liabilities of FHPL was as follows:40
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Assets S$ (US$ equivalent)
Cash & Cash equivalents 11,178,000 9,162,295
Property, Plant & Equipment 924,000 757,377
Trade & other receivables 19,104,000 15,659,016
Total Assets ------ (a) 31,206,000 25,578,689
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Liabilities S$
Trade & other payables 14,151,000 11,599,180
Borrowings 15,696,000 12,865,574
Current tax liabilities 31,000 25,410
Deferred tax liabilities 1,181,000 968,033
Total Liabilities ------ (b) 31,059,000 25,458,197
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Net Tangible Assets ------ (a)-(b) 147,000 120,492

Minority stake ------ (c) 55,000 45,082
Consideration paid ------ (d) 89,500,000 73,360,656
Goodwill -----(d) – [(a)-(b)] + (c) 89,408,000 73,285,246
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37
“SingPost's Corporate Governance Blunder a Result of "Carelessness", Says Special Audit Report”, Singapore Business Review, May
4, 2016, http://sbr.com.sg/transport-logistics/news/singposts...dpuf, accessed May 2016.
38
Acquisition on SGX Net on 18 Jan, 2013,
https://www.singpost.com/sites/default/files/b2c_financial_news_files/2015/10/ann20130118famous.pdf
39
US$1=S$1.22 as at January 2013, www.xe.com. All conversions have been made at this rate through the case.
40
SingPost, 2012-13 Annual Report, Page 188, Notes to Financial Statements, No. 37(e).
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 The fair value of FHPL was estimated at S$89.5 million (US$73 million), with estimated net
profit ranging from S$5 million (US$4 million) to S$10 million (US$8 million).41
 The acquired business contributed revenue of S$14.5 million (US$12 million) and net profit
of S$0.2 million (US$0.16 million) to the Group from the period 20 Feb 2013 to 31 March
2013. Had FHPL been consolidated since 1 April 2012, it would have contributed S$151
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million (US$124 million) to revenues and S$1.9 million (US$1.5 million) to profits.42
 The entry price/earnings (PE) ratio was S$89.5mn million/S$1.9mn million = 47.1x (refer to
Exhibit 4 for details of a PE ratios for a comparable listed logistics company, to Exhibit 5
for information on other acquisitions by SingPost, to Exhibit 6 for the financials related to
two comparable industry transactions, and to Exhibit 7 for multiples across the
transportation sector in the US).
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What Next?
Under the watchful eyes of all stakeholders, the company was clearly going to make the changes
recommended under the Special Audit Report. But would this be too little too late? While some
market watchers considered the saga closed, quoting the Special Auditors’ conclusion that this was
a case of “carelessness” rather than deliberate fraud, others cautioned that “a breach is a breach,
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whatever the outcome”, and that maintaining the sanctity of Singapore as a ‘quality’ market required
regulatory action even though the error had no impact on the decisions made.43
SingPost’s appointment of Simon Israel as chairman, effective 11 May 2016 was a distinct move by
the company to regain the trust of its stakeholders. Israel’s stellar record and immediate affirmation
of his focus on improving the company’s governance procedures were hoped to improve public
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sentiment about the postal giant. A Public Service Medal awardee, Israel was also chairman of Singtel
(SingPost’s largest institutional shareholder) and a director of reputed companies such as CapitaLand
Limited, Fonterra Co-operative Group Limited and Stewardship Asia Centre. He was on Westpac’s
Asia Advisory Board and a member of the governing board of Lee Kuan Yew School of Public Policy.
Israel had previously served as chairman of Asia Pacific Breweries Limited and executive director
and president of Temasek Holdings.44
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Zulkifli Baharudin, chairman of SingPost’s Nominations Committee, said, “Simon is well-suited to

improving the corporate governance of the company and lead SingPost to be a world-class leader in
eCommerce logistics.” He also added that as Israel would be a non-independent chairman, the
Nominations Committee would appoint the lead independent director shortly.45
41
Ibid.
42
SingPost, 2012-13 Annual Report, Page 189, Notes to Financial Statements, No. 37(h).
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43
Singapore Law Watch, “A Breach is a Breach, Whatever the Outcome: SingPost corporate governance special audit”, May 24, 2016,
http://www.singaporelawwatch.sg/slw/headlinesnews/... dpbs, accessed May 2016.
44
“SingPost Announces New Chairman, SingPost Press Release”, May 5, 2016,
http://www.singpost.com/download/AboutSingPost/Media/NewsReleases/2016/pr20160505.pdf, accessed May 2016.
45
“SingPost Names Simon Israel as New Chairman”, Channel News Asia, May 5, 2016,
http://www.channelnewsasia.com/news/business/singapore/singpost-names-simon/2759664.html, accessed May 2016.
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Would the actions taken by SingPost to correct the mistakes made and institute formal governance
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measures suffice? What else does the company need to do now to win back the trust of its
shareholders, the regulators and the public at large? Were there early warning signs that were ignored?
What steps, if any, should the regulatory authorities of Singapore take against the postal giant’s board
to ensure that the city state’s reputation for quality of governance and transparency remains unsullied?
What lessons can companies and policymakers in Singapore and elsewhere learn from SingPost’s
lapses?
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No
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EXHIBIT 1: SINGPOST FINANCIAL PERFORMANCE: 2011- 2015 (IN US$ MILLIONS46)
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FYE FYE FYE FYE FYE
March 31, March 31, March 31, March 31, March 31,
2015 2014* 2013* 2012 2011
Income Statement
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Revenue 666.4 595.0 477.4 419.2 410.0
Operating profit 135.1 164.9 126.4 132.5 149.7
EBITDA 165.9 191.1 155.1 155.7 168.6
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Net profit 114.2 139.1 98.9 102.9 116.7
Underlying net profit 113.9 108.3 102.2 98.1 108.4
Balance Sheet
Total assets 1592.6 1261.2 1394.2 1036.4 792.0

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Ordinary
809.6 554.7 500.3 226.8 236.3
shareholders’ equity
Cash and cash

423.3 293.0 455.3 447.4 245.4
equivalents
tC
Net (cash)/ net debt -250.6 -123.4 -66.5 -80.9 119.1
Perpetual securities 251.3 251.3 251.3 251.3 0.0
Cash Flow
Net cash inflow from
No
170.3 175.2 147.1 128.0 135.4

operating activities
Capital expenditure
75.7 27.4 17.7 18.9 8.9
(cash)
Free cash flow 94.6 147.9 129.4 109.1 126.5

Do
* Income Statement was restated.

Source: SingPost, “Annual Report” (2015) http://www.singpost.com/download/ar201415.pdf, accessed May 2016.
46
US$1= SG$1.38 as at May 24, 2016, www.xe.com.
11/18
t
EXHIBIT 2: BOARD OF DIRECTORS
os
1. Lim Ho Kee, 70, Chairman, Non-executive, independent director
Date of first appointment as a director: 25 April 1998
Board committee(s) served on:
Executive Committee (Chairman); Nominations Committee (Member)
rP
Academic & Professional Qualification(s): Bachelor of Sciences
Present Directorships in other listed companies (as at 31 March 2015): Nil

Principal Commitments: Majuven Pte. Ltd. (Managing Partner)
Past Directorships in listed companies held over the preceding three years: Jardine Cycle &
Carriage Limited; Keppel Land Limited
yo
2. Goh Yeow Tin, 63, Deputy Chairman, Non-executive, independent director
Date of first appointment as a director: 7 July 2014
Compensation Committee (Chairman); Executive Committee (Member)
Academic & Professional Qualification(s): Masters of Engineering

op
Present Directorships in other listed companies (as at 31 March 2015): Vicom Ltd; Sheng Siong
Group Ltd; OEL (Holdings) Limited; Lereno Bio-Chem Ltd.; AsiaPhos Limited
Principal Commitments: Seacare Medical Holdings Pte Ltd (Non-Executive Chairman)
Past Directorships in listed companies held over the preceding three years: Nil
3. Tan Yam Pin, 74, Non-executive, independent director

tC
Date of first appointment as a director: 25 February 2005

Audit Committee (Member); Board Risk and Technology Committee (Member); Compensation
Committee (Member); Executive Committee (Member)
Academic & Professional Qualification(s): Master of Business Administration, University of

British Columbia; Fellow, Canadian Institute of Chartered Accountants, Canada
No
Present Directorships in other listed companies (as at 31 March 2015): Keppel Land Limited;
Great Eastern Holdings Limited
Principal Commitments: Singapore Public Service Commission (Deputy Chairman)
Past Directorships in listed companies held over the preceding three years: BlueScope Steel
Limited (Australia)
4. Keith Tay Ah Kee, 71, Non-executive, lead independent director

Date of first appointment as a director: 25 April 1998
Do

Nominations Committee (Chairman); Audit Committee (Member); Executive Committee
(Member)
12/18
t
Academic & Professional Qualification(s): Fellow, Institute of Chartered Accountants in England
os
and Wales; Honorary Fellow, Institute of Singapore Chartered Accountants
Present Directorships in other listed companies (as at 31 March 2015): Singapore Reinsurance
Corporation Limited; Rotary Engineering Limited; FJ Benjamin Holdings Ltd; YTL Starhill Global
REIT Management Limited
Principal Commitments: Stirling Coleman Capital Ltd (Non-Executive Chairman)
rP
Past Directorships in listed companies held over the preceding three years: SATS Limited
5. Dr Wolfgang Baier, 41, Group Chief Executive Officer, Executive, non-independent

director
Date of first appointment as a director: 5 October 2011
Executive Committee (Member)
yo
Academic & Professional Qualification(s): PhD in Laws, University of Vienna; Master of Laws,
University of Vienna; Master of Business Economics, Universities of Exeter (UK) and Graz
(Austria)

Principal Commitments: Nil
op
6. Professor Low Teck Seng, 60, Non-executive, independent director

Date of first appointment as a director: 8 October 2010
Board Risk and Technology Committee (Chairman)
tC
Academic & Professional Qualification(s): Bachelor of Science (First Class Honours) and Ph.D,
Southampton University; Institute of Electrical and Electronics Engineer (Fellow);
Royal Academy of Engineers (Fellow)
Present Directorships in other listed companies (as at 31 March 2015): Excelpoint Technology
Ltd; ISEC Healthcare Ltd
Principal Commitments: National Research Foundation (Chief Executive Officer)
No
Past Directorships in listed companies held over the preceding three years: Innotek Limited
7. Soo Nam Chow, 61, Non-executive, independent director

Date of first appointment as a director: 20 December 2013
Audit Committee (Chairman); Nominations Committee (Member)
Academic & Professional Qualification(s): Fellow Member, Association of Chartered Certified

Do
Accountants, United Kingdom; Member, Institute of Singapore Chartered Accountants
Present Directorships in other listed companies (as at 31 March 2015): Mapletree Industrial Trust
Management Ltd
13/18
t
Principal Commitments: Nil
os
8. Bill Chang York Chye, 49, Non-executive, non-independent director

Date of first appointment as a director: 15 Nov 2010
Board Risk and Technology Committee (Member); Compensation Committee (Member)
rP
Academic & Professional Qualification(s): Bachelor of Engineering (Electrical and
Computer Systems Engineering) Monash University

Principal Commitments: Singapore Telecommunications Limited (Chief Executive Officer, Group
Enterprise); Singapore Polytechnic (Chairman of Board of Governors)
yo
9. Chen Jun, 41, Non-executive, non-independent director

Date of first appointment as a director: 31 July 2014
Nil
op
Academic & Professional Qualification(s): Bachelor of International Finance and Accounting,
Shanghai University; EMBA degree, INSEAD, France
Present Directorships in other listed companies (as at 31 March 2015): Alibaba Health Information
Technology Limited
Principal Commitments: Alibaba Group Holding Limited (Vice President)
tC
10. Zulkifli Bin Baharudin, 55, Non-executive, independent director

Date of first appointment as a director: 11 November 2009
Audit Committee (Member); Compensation Committee (Member); Nominations Committee
(Member)
No
Academic & Professional Qualification(s): Bachelor of Science (Estate Management),

National University of Singapore
Present Directorships in other listed companies (as at 31 March 2015): Ascott Residence Trust
Management Limited
Principal Commitments: Uzbekistan Non-Resident Ambassador; Kazakhstan (Non-Resident
Ambassador); Indo Trans Logistics Corporation (Chairman); Civil Aviation Authority of Singapore
(Board Member); Singapore Management University (Member, Board of Trustees)
Do
Past Directorships in listed companies held over the preceding three years: Hup Soon Global
Corporation Limited
11. Aliza Knox, 54, Non-executive, independent director
14/18
t
Date of first appointment as a director: 30 August 2013
os
Board Risk and Technology Committee (Member)
Academic & Professional Qualification(s): Masters in Business Administration in Marketing, New

York University Graduate School of Business Administration, Bachelor of Arts in Applied Math
and Economics, Brown University
rP
Present Directorships in other listed companies (as at 31 March 2015): InvoCare Limited; GfK SE
Principal Commitments: Twitter, Inc., Singapore (Managing Director)
12. Michael James Murphy, 61, Non-executive, non-independent director
Date of first appointment as a director: 7 August 2009
yo
Board Risk and Technology Committee (Member)
Academic & Professional Qualification(s): Bachelor of Science (Nuclear Engineering and

Industrial Technology), University of Massachusetts

Principal Commitments: Postea Group, Inc. (Founder and Chief Executive Officer)
op
Source: SingPost, “Annual Report 2015”, http://www.singpost.com/download/ar201415.pdf, accessed May 2016.

tC
No
Do
15/18
t
EXHIBIT 3: BOARD COMMITTEES
os
Board Committee Key Responsibilities Membership
Executive Oversees the management of the business and affairs
Mr Lim Ho Kee
Committee of the Group as may be delegated by the Board. (Chairman)
Dr Wolfgang Baier
rP
Exercises oversight over Management. Mr Goh Yeow Tin
Mr Tan Yam Pin Approves
investments and divestments within the Mr Keith Tay Ah Kee
threshold limits delegated to it by the Board and
makes recommendations to the Board in respect of
investments and divestments over such limits.
__________________________________________________________________________________
yo
Nominations Assists the Board in fulfilling its responsibilities Mr Keith Tay Ah Kee
Committee on ensuring Board effectiveness and the selection, (Chairman)
nomination, appointment, re-appointment of directors. Mr Lim Ho Kee
Mr Soo Nam Chow
Assists the Board in fulfilling its responsibilities on Mr Zulkifli Bin Baharudin
Board succession planning, evaluation and training.
Reviews and makes recommendations to the Board on

key staff appointments of the Group.
op
____________________________________________________________________________________
Compensation Assists the Board in fulfilling its responsibilities Mr Goh Yeow Tin Committee
on developing an appropriate compensation and (Chairman)
remuneration framework for directors and employees Mr Bill Chang York
of the Group Chye
Mr Tan Yam Pin
Mr Zulkifli Bin Baharudin
tC
___________________________________________________________________________________
Audit Assists the Board in fulfilling its oversight

Mr Soo Nam Chow
Committee responsibilities on internal controls, financial
(Chairman)
Reporting, compliance and risk management
Mr Tan Yam Pin
of the Group Mr Keith Tay Ah Kee
Mr Zulkifli Bin Baharudin
____________________________________________________________________________________
No
Board Risk and Assists the Board in fulfilling its oversight

Professor Low Teck
Technology responsibilities on risk management of the Group
Seng
Committee (Chairman)
Assists the Board in fulfilling its oversight Mr Bill Chang York
responsibilities on matters relating to technology in Chye
executing the business strategies of the Group. Ms Aliza Knox
Mr Michael James Murphy
Mr Tan Yam Pin
_____________________________________________________________________________________
Do
Source: SingPost, “Annual Report 2015”, http://www.singpost.com/download/ar201415.pdf, accessed May 2016.
16/18
t
EXHIBIT 4: P/E RATIO FOR A COMPARABLE COMPANY
os
Sinwa Limited, listed on the SGX
Number of shares issued as at 22 February 2013 334,679,335
rP
Number of shares issued as at 22 February 2013 334,679,3335
Share price as at 22 February 2013 S$0.14
Market Cap as at 22 February 2013 S$46,855,107
Profit for Q1, 2013 S$2,657,000
yo
Annualised profit for 2013 S10,628,000
(based on Q1 results)
P/E ratio 4.41
Source: Sinwa Limited, Q1 2013 results.

op
EXHIBIT 5: P/E RATIOS, GOODWILL FOR OTHER ACQUISITIONS BY SINGTEL
Target, Date Conside- NTA Target P/E Goodwill P/BV P/E Goodwill
ration (S$ millio annualized (forward) (S$ millio / Total
(S$ milli ns) Rev, Net including ns) Consider
tC
ons) Profit Target cash ation %

(S$ millions
)
Novation 12.26 13.15 26.6 / 1.8 12.26/1.8 = (0.89) 0.93X 6.81 X -7.2%
Solutions Ltd 6.81x
/ 18 May 2012
No
General 36.9 24.48 7.7/1.4 36.9/1.4 = 12.42 1.51x 26.4x 33.6%

Storage 26.4x
Company Pte
Ltd / 29 Jan
2013
FHPL / 20 Feb 89.5 0.147 151/1.9 89.5/1.9 = 89.4 608.8x 47.1x 99.8%
2013 47.1x
Do
Source: Singtel, Annual Report 2012/2013
17/18
t
EXHIBIT 6: COMPARABLE ACQUISITIONS IN 2015/2016
os
Acquisition of NOL’s logistics business by Kintetsu in May 2015:
In May 2015, Kintetsu completed the acquisition of 100% of APL’s logistics business for US$1.24
billion.
rP
FY’14 Revenues: US$1.59 billion
FY’14 EBITDA: US$75 million
EV/EBITDA: 16.5x
yo
Acquisition of NOL by CMA CGM in 2016, announced in 2015.
This was one of the largest global logistics transactions of 2016. The transaction was completed at
P/ BV multiple of 1.36x, for a target with an EBITDA of S$324million as of December 2015.
op
Source: Neptune Orient Lines Limited, Annual Report 2015, https://www.nol.com.sg/wps/wcm/connect/... - Page
7, accessed November 2016.
Malminderjit Singh, “NOL to sell APL Logistics to Japan's KWE for US$1.2b”, February 18, 2015,
http://www.businesstimes.com.sg/transport/nol-to-sell-apl-logistics-to-japans-kwe-for-us12b, accessed November
2016.
tC
EXHIBIT 7: MULTIPLES ACROSS THE TRANSPORTATION SECTOR IN THE US
EV/
Industry Number of Invested
Name firms PBV ROE Capital ROIC
No
Transportation 21 5.65 20.32% 3.69 20.14%
Source: Aswath Damodaran, “Market value (equity and enterprise value) as multiple of book value (equity and
invested capital”, January 5, 2016, http://www.stern.nyu.edu/~adamodar/pc/datasets/pbvdata.xls, accessed
November 2016.
Do
18/18

A Corporate Governance Breach at Singpost

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A Corporate Governance Breach at Singpost

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SMU Classification: Restricted

A CORPORATE GOVERNANCE BREACH AT SINGPOST

announced that due to an ‘administrative oversight’, it had, in an SGX announcement on 18 July

centre/news-releases/632-singpost-group-ceo-dr-wolfgang-baier-resigns.html, accessed May 2016.

Copyright © 2017, Singapore Management University Version: 2017-02-10

SMU-16-0028 A Corporate Governance Breach at SingPost

SingPost Corporate Profile

centre/news-releases/641-singpost-chairman-to-step-down-at-the-agm-in-july-2016.html, accessed May 2016.

SMU-16-0028 A Corporate Governance Breach at SingPost

SMU-16-0028 A Corporate Governance Breach at SingPost

centre/news-releases/641...2016.html, accessed May 2016.

SMU-16-0028 A Corporate Governance Breach at SingPost

a financial advisor in regard to these acquisitions.

SMU-16-0028 A Corporate Governance Breach at SingPost

In a statement through his lawyers on May 3, 2016, Tay stated,

http://infopub.sgx.com/FileOpen/SGXAnn.ashx?App=Announcement&FileID=402769, accessed May 2016.

SMU-16-0028 A Corporate Governance Breach at SingPost

SingPost’s board members countered with the following statement,

propositions/conducive-pro-business-environment.aspx, accessed May 2016.

SMU-16-0028 A Corporate Governance Breach at SingPost

Net Tangible Assets ------ (a)-(b) 147,000 120,492

SMU-16-0028 A Corporate Governance Breach at SingPost

Zulkifli Baharudin, chairman of SingPost’s Nominations Committee, said, “Simon is well-suited to

SMU-16-0028 A Corporate Governance Breach at SingPost

SMU-16-0028 A Corporate Governance Breach at SingPost

Operating profit 135.1 164.9 126.4 132.5 149.7

EBITDA 165.9 191.1 155.1 155.7 168.6

Underlying net profit 113.9 108.3 102.2 98.1 108.4

Total assets 1592.6 1261.2 1394.2 1036.4 792.0

Cash and cash

Net (cash)/ net debt -250.6 -123.4 -66.5 -80.9 119.1

Perpetual securities 251.3 251.3 251.3 251.3 0.0

170.3 175.2 147.1 128.0 135.4

Free cash flow 94.6 147.9 129.4 109.1 126.5

* Income Statement was restated.

SMU-16-0028 A Corporate Governance Breach at SingPost

Present Directorships in other listed companies (as at 31 March 2015): Nil

Academic & Professional Qualification(s): Masters of Engineering

3. Tan Yam Pin, 74, Non-executive, independent director

Date of first appointment as a director: 25 February 2005

Academic & Professional Qualification(s): Master of Business Administration, University of

4. Keith Tay Ah Kee, 71, Non-executive, lead independent director

Board committee(s) served on:

SMU-16-0028 A Corporate Governance Breach at SingPost

5. Dr Wolfgang Baier, 41, Group Chief Executive Officer, Executive, non-independent

Present Directorships in other listed companies (as at 31 March 2015): Nil

6. Professor Low Teck Seng, 60, Non-executive, independent director

7. Soo Nam Chow, 61, Non-executive, independent director

Academic & Professional Qualification(s): Fellow Member, Association of Chartered Certified

Accountants, United Kingdom; Member, Institute of Singapore Chartered Accountants

SMU-16-0028 A Corporate Governance Breach at SingPost

8. Bill Chang York Chye, 49, Non-executive, non-independent director

Present Directorships in other listed companies (as at 31 March 2015): Nil

9. Chen Jun, 41, Non-executive, non-independent director

10. Zulkifli Bin Baharudin, 55, Non-executive, independent director

Academic & Professional Qualification(s): Bachelor of Science (Estate Management),

11. Aliza Knox, 54, Non-executive, independent director

SMU-16-0028 A Corporate Governance Breach at SingPost

Academic & Professional Qualification(s): Masters in Business Administration in Marketing, New

Academic & Professional Qualification(s): Bachelor of Science (Nuclear Engineering and

Present Directorships in other listed companies (as at 31 March 2015): Nil

Source: SingPost, “Annual Report 2015”, http://www.singpost.com/download/ar201415.pdf, accessed May 2016.

SMU-16-0028 A Corporate Governance Breach at SingPost