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SINGAPORE: Singapore Post's termination of its three top executives is a case rarely seen in Singapore’s corporate governance scene, experts said. 

Singapore's main postal service provider said it sacked group chief executive officer Vincent Phang, group chief financial officer Vincent Yik and chief executive of the company’s international business unit Li Yu on Saturday (Dec 21) after concluding disciplinary proceedings into their conduct.  

The move comes after a whistleblowing report was filed earlier this year about the group's non-regulated international e-commerce logistics parcel business. Three other managers who were directly involved in this matter – but not identified by SingPost – were fired. 

Mr Phang, Mr Yik and Mr Li were separately found to have been "grossly negligent" in their handling of this matter. 

Having a company sack three of its key executives at a go is "unprecedented", said Professor Lawrence Loh from the National University of Singapore (NUS). 

"Companies don't usually openly terminate their most senior management, unless there is some management issue or conflict," said Prof Loh, who is from NUS Business School's Centre for Governance and Sustainability. 

Prof Loh pointed out that some local businesses, such as Dasin Retail Trust, had recently terminated its top leaders, but that these were more related to disagreements. 

"Usually when the board (of directors) has some issue with management, they usually opt for softer options. For example, they will let them resign or have some public statement that they’ve left company to seek other opportunities,” he said. 

CitadelCorp principal consultant Victor Lai said it was "very rare that three senior executives are terminated from their roles concurrently" in Singapore’s corporate governance environment.

"This case involving SingPost will likely become a reference case for Singapore’s corporate governance landscape," said Mr Lai, whose firm provides corporate and advisory services. 

Like Mr Lai, Nanyang Technological University's (NTU) Associate Professor of Accounting Kelvin Law said he has not seen similar cases in Singapore. 

He compared the case to a company in the US healthcare sector that sacked its CEO, CFO and chief legal officer.

"What makes this situation unique is the simultaneous departure of leaders from both group-level management and a key business unit," Assoc Prof Law said. 

SIGNIFICANCE OF SACKINGS

Mr Lai said that a decision to terminate three senior executives simultaneously indicated that the board perceived the issue to be "irreparably egregious", and that retaining the trio would have been "untenable for the company". 

"Such a decision must be carefully conceived and undertaken by the board due to the severity of the consequences, especially when it becomes publicly disclosed," said Mr Lai, who added that the move may lead to customers and investors losing confidence in the company. 

On the flipside, NUS' Prof Loh described the decision as "decisive corporate governance action against management lapses" that could serve to strengthen confidence in the board, as it proves that the board has oversight over its management.

"This is a case where corporate governance trumps management," he said. 

SingPost’s past setbacks may also explain its decision, Prof Loh said. SingPost has been fined previously for service lapses and was issued a stern warning in 2019 after a postman with special needs dumped unopened mail. 

"At the broader level, SingPost has suffered various incidents of service lapses, or even errant postman behaviour in recent years, so I think there's a need to send a signal that credibility is a very important factor for this business," said Prof Loh. 

In 2019, SingPost was fined S$100,000 (US$74,000) for failing to meet service standards.

The lapse occurred in May 2017, when the postal service provider did not meet the minimum requirement for the delivery of basic local letters within the central business district by the next working day.

That year, SingPost also failed to achieve the targets for the delivery of basic letters and registered mail across several months.

"The critical issue is (the organisation’s) … nature where service culture, trust in delivery is fundamental to the business," Prof Loh added. 

NTU's Assoc Prof Law said SingPost's case highlighted the need for companies to have "formal, robust internal process" for whistleblowing.

"Companies should review their reporting channels and internal control systems. For companies that do not have one, maybe they should consider implementing a robust and formal platform for handling internal feedback and concerns," he added. 

SINGPOST’S NEXT STEPS

Experts flagged how damaging such a move could be for SingPost, a company listed on the Singapore Exchange (SGX). 

As of Monday evening, SingPost's share price had fallen by nearly 11 per cent and finished the trading day at S$0.50.

Prof Loh and Assoc Prof Law pointed to this as evidence of how the termination has negatively affected SingPost.

While immediate market reaction often shows in the stock price movements, the long-term impact would largely depend on the board's ability to manage the transition and restore stakeholder confidence, said Assoc Prof Law. 

CitadelCorp's Mr Lai said that replacing the executive roles would be "challenging and arduous" as candidates must be critically assessed on their expertise, experience and suitability. 

"The process of filling the positions or the reconstitution of the management team will be a dynamic process to balance business continuity in day-to-day operations and addressing the succession gap caused by an abrupt termination of senior executives," Mr Lai said. 

The other experts said the nature of the industry presented challenges in the search for replacements. 

Prof Loh said that talent in the postal service industry was limited, but that it may be easier to find replacements from the broader logistics industry. 

Beyond that, SingPost is likely to face pressure on multiple levels following the high-profile terminations.

Assoc Prof Law said that regulatory bodies are likely to follow up on compliance and governance procedures, while consumers and analysts may monitor the firm's operational performance more closely. 

Institutional investors may also review their holdings while auditors will scrutinise the company in the upcoming audit, he added. 

Mr Lai said that SingPost will have to be mindful of its obligations under SGX Listing Rules and the Code of Corporate Governance.

The company is required to consider the timing and the extent of disclosure of material information that may affect its value. It also has to bear in mind the impact of the disclosure on shareholders.

Its disclosure may have knock-on effects on other customers, who may raise concerns about their business arrangements with SingPost, he added. 

"Hence, SingPost’s board of directors and management must closely monitor the developments on this matter to assess whether further public disclosures become necessary in due course," Mr Lai said.