Commentary: Are SingPost’s lapses indicative of a deeper malaise in the company?
Those at SingPost have a heavy burden of fixing past issues after sweeping changes at the senior management level and hasty acquisitions made some years back, says NUS Business School’s Mak Yuen Teen.
SINGAPORE: In a digital age where transactions, notifications and records have been digitalised, you would think the postman gets it easier.
But news of SingPost’s investigations this week after fresh images of mail found in a rubbish bin in Ang Mo Kio went viral and its subsequent update that it has referred the case to the Police have touched a raw nerve.
Last year, SingPost fired a postman after he was found to have thrown away returned letters and direct mail at a condominium, and a video of someone confronting the man and claiming he had just thrown a stack of letters into a rubbish bin had gone viral.
SingPost too had issued an apology just two weeks ago after receiving a string of complaints regarding undelivered mail from residents.
These operational lapses have raised questions as to whether the company’s board of directors ought to be held responsible.
Are these episodes management failures that could have occurred even with the best corporate governance in place, or could they be indicative of the board failing to exercise adequate oversight and discharging their responsibilities?
The answer lies in the extent to which the board has taken necessary and reasonable steps when it became aware of problems.
Under Singapore’s Companies Act, the board of directors is responsible for managing, directing and supervising the company, and directors are required to act honestly and use reasonable diligence in the discharge of their duties.
In most companies, the board delegates the day-to-day management role to a management team led by the Chief Executive Officer or equivalent, with the board’s role then focused on advancing the interests of the company and its stakeholders, through overseeing, guiding and holding its management accountable.
But as part of its oversight role, the board is expected to ensure the necessary resources are in place for the company to meet its strategic objectives.
The board also has to ensure that there are proper policies, procedures and controls which are implemented in practice. It is responsible for appointing an ethical, competent and committed management team, and putting in place independent audit functions that provide reasonable assurance that the policies, procedures and controls are adequate and effective.
Let’s now consider the reported service failures at SingPost - including stacks of letters left on top of letter boxes, letters being thrown away, postmen delivering failed delivery notices but not actually ringing people’s doors and leaving parcels on people’s doorstep, as well as allegations of falsifications of proof of delivery.
SingPost had blamed a seasonal surge in demand over the November to December period, and cites additional 20 doorstep deliveries each day. Yet some readers say these problems seem to be longstanding ones that occur throughout the year so it is difficult to see how the fault can be attributed to seasonal factors.
Seasonal surges in demand are also recurrent in nature in the business of mail delivery so it is reasonable to expect the management to have forecasted demand and allocated the necessary resources to meet it.
SingPost had also attributed the incidents to the individual actions of a few wayward employees. But many of these service failures are clearly not new. For some years now, there had been complaints of failed delivery notices despite households having someone at home at those times.
SingPost had then referred the most recent case of mail seen in an Ang Mo Kio rubbish bin to the police, which may go some way to deter future rogue acts by errant postmen but might this distract from the crux of these problems? And will it solve any potentially deeper corporate governance issues?
PAST TROUBLES RISING BACK TO THE SURFACE?
Between 2015 and 2016, a number of corporate governance concerns over SingPost’s business operations were raised in a series of news reports and commentaries, which later contributed to an overhaul of the company’s board and senior management. Understanding what some of these woes were for SingPost those years ago may illuminate the root of the service lapses in recent months.
One concern was whether SingPost’s ventures into e-commerce and other areas would affect the quality of its traditional postal services, and how equipped SingPost was to drive this new business model.
Over a five-year period, the company made more than 20 acquisitions, spending over half a billion dollars to transform SingPost from a mail delivery business to a logistics and e-commerce business.
With traditional postal services relegated to a sunset industry, there were concerns the company may lose sight of ensuring service standards are maintained, when other areas promise more potential for growth and hold greater lure for investors with deep pockets.
A second concern was whether some of the long-serving independent directors who had been there for almost two decades had been there for too long. Did they have relevant experience and skills in the context of SingPost’s transformation? Might they have been overstepping their boundaries in making decisions they might not be equipped to?
Some of these directors formed an unusually active executive committee, blurring the lines between the role of company management and that of the board. The last acquisition made by the then board and executive committee – the US e-commerce company TradeGlobal – cost the company S$236 million but had to be impaired by S$185 million just one-and-a-half years after.
The board had also recruited then 37-year old Dr Wolfgang Baier as CEO (International) in 2011 and promoted him to Group CEO the same year. They also appointed Dr Sascha Hower Group Chief Operating Officer in 2012 when he was 33. Both left in 2016.
A third concern was whether the management team was equipped to integrate and manage the new businesses. Based on the disclosures of their profiles at the time of the appointment, Dr Baier and Dr Hower were career consultants with little or no experience managing companies. Several other consultants were also appointed to key management positions.
Then there was the high turnover of management, both in the years preceding the appointment of Dr Baier, and following his departure. Stock exchange rules only require disclosure when directors and certain key officers leave so it is unclear whether this was indicative of a similarly high employee turnover throughout the company.
A HEAVY BURDEN FOR THE CURRENT TEAM AT SINGPOST
Today, SingPost’s board and senior management team are unrecognisable from those years.
A new group CEO took over in June 2017, a new group CFO in August 2018 and a new CEO for postal services and Singapore will be taking over in April 2019. Hopefully, a stronger and stable management team is now in place but it will not be easy to turn this ship around, and not when a COO has not been appointed since Dr Hower left in 2016, a role that bears the heavy responsibility of optimising group operations.
The current directors and senior management have the task of sewing up remaining corporate governance issues, reviewing the over 20 acquisitions made, improving operations, all while feeling the pressure from shareholders, an inherited legacy the new team will have to struggle with for some time.
These issues from the past may affect SingPost’s day-to-day operations if business controls have been weakened, including those relating to employee recruitment, induction, training, welfare, supervision and assessment - fueling frustration among its overworked and underappreciated postmen.
SingPost’s share price has dipped to about 60 per cent of what it was just before Dr Baier's departure, and dividends have been cut. Public confidence too has been shaken when the recent few cases found huge traction with readers who say they experienced similar issues.
While the current board has taken steps to improve SingPost’s corporate governance and put in place a new management team, it needs to ensure that a thorough review of SingPost’s operations is conducted in light of the numerous lapses.
It should certainly not dismiss problems by attributing these to seasonal factors or rogue employees without a comprehensive assessment of the complaints.
This review has taken on even more urgency with the announcement by the Info-communications Media Development Authority (IMDA) that it will take firm action against SingPost for any breaches of its public postal licence requirements, that it “takes a serious view of any incident that impacts the reliability, integrity and security of Singapore's public postal services", and its direction that "SingPost must investigate all complaints and feedback raised, and take urgent steps to improve its service standards and restore public confidence in its postal services".
Mak Yuen Teen is an associate professor of accounting at the NUS Business School where he specialises in corporate governance. The views in this article are his personal views.