A CORPORATE GOVERNANCE BREACH AT SINGPOST 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 Exchange, and continued to perform well, remaining profitable over the years. Shareholders were generally pleased with the company. SingPost had been given exclusive rights to receive, collect and deliver letters and postcards until March 2007. With new entrants into the once exclusive postal markets, competition increased. Global trends too had the potential to severely impact SingPosts performance. With the rise in Internetbased 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 2011. 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. The genesis of the problem went back to January 2013, when SingPost purchased a 62.5% equity stake in Famous Holdings Pte Ltd ( FHPL) for S$60 million, 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 i n Famous Pacific Shipping (New Zealand) Limited (FPSNZ). All these three companies FHPL, FSM and FPSNZ had appointed Stirling Coleman Capital Limited (SCCL) as a financial advisor in regard to these acquisitions. Tay, the lead independent board direct 34.5% shareholder of SCCL or at SingPost, was the nonexecutive Chairman and a 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 non e of its directors had an interest in the acquisition. At the end of financial year 2015, SingPosts board comprised 12 directors. This was a relatively large board compared to other companies in a similar business segment across the globe. Of the 12 direc tors, eight were independent (outsiders), and other than Baier SingPosts CEO, all were nonexecutive directors(related outsiders). In terms of frequency of board meetings, the board met at least quarterly to review and approve the release of the Group s quarterly results, as well as discuss and resolve all matters requiring its approval. Beside the direct ramifications for Tay, there were possible consequences for the other directors on SingPosts board, who could also be held accountable for the discl under the Securities and Futures Act (SFA) or the Companies Act. osure errors 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, whatever the outcome, and that maintaining t he sanctity of Singapore as a quality market required regulatory action even though the error had no impact on the decisions made. 23 Case Questions: 1. Discuss the importance of a board of directors and describe the structure of SingPosts board. (20 marks) 2. Explain four (4) ways that SingPost can enhance the effectiveness of its Board of Directors. (10 marks) 3. Explain the concepts of ownership concentration and executive compensation and how they could have been used at SingPost as corporate governance mechanisms.