Phang and Yik, according to SingPost, will "vigorously contest" the termination on merits and on the grounds of procedural unfairness, says SingPost on Dec 22.
SingPost shares on Dec 23, in reaction to the news, dropped by more than 10% to close at 50 cents.
Under Phang, SingPost is in the midst of executing a strategic review where most recently on Dec 2, it announced the sale of Australian assets held under an entity called Freight Management Holdings (FMH) to Pacific Equity Partners for an enterprise value of A$1.02 billion, or $ 897.6 million.
The sale is subject to the approval of SingPost's shareholders at an EGM to be held.
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It is not clear at this moment if the termination of Phang, Yik and Li will have a bearing on this transaction.
'Delivery failure'
According to SingPost in a statement on Dec 22, it had received a whistleblowing report earlier this year that the three unnamed employees had either performed or approved manual updates of the so-called "delivery failure" status codes for parcels assigned for delivery, even though no delivery attempt had been made and without supporting documents.
The manual updates were not made according to its standard processes regarding status updates for deliveries.
The point of updating the status codes is so that SingPost can avoid "contractual penalties".
SingPost did not indicate how many parcels were involved.
The employment of these three individuals who changed the delivery codes had been earlier terminated and a police report made against them.
SingPost says that a whistleblowing report on the same matter was also sent to the Info-communications Media Development Authority of Singapore, which regulates the postal industry.
According to SingPost's internal probes upon receiving the whistle-blowing reports, the three senior executives Phang, Yik and Li were deemed "grossly negligent" and had omitted to consider material facts that compromised their decision-making.
The three executives had "accorded undue weight to the misrepresentations by representative(s)" from the unit involved "without any independent substantiation or evidence".
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In addition, they had made various "serious misrepresentations" to the board's audit committee, which has oversight responsibilities on internal controls, financial reporting, fraud, compliance and risk management systems, including oversight and monitoring of whistleblowing.
As such the three executives were found to have "failed to exercise due diligence and breached their duties" and have undermined SingPost's internal audit function.
"Given the seriousness of these lapses and findings, the board has lost confidence and trust in the judgment of GCEO, GCFO and CEOIBU, and in their ability to perform their duties towards promoting and protecting the interests of the company," says SingPost.
Phang first joined the company in 2019 as CEO for postal services and Singapore, before taking on the group CEO job on Sept 1 2021. He held roles such as CEO of ST Logistics.
Yik joined the company in Dec 2021, having previously worked at Far East Orchard and OUE Lippo Healthcare . Li, meanwhile, joined SingPost in Sept 2022. He was previously with UPS.
SingPost says it has informed the unnamed customer about the whistleblowing reports and the findings. It has also paid the customer an unspecified sum of money as a form of settlement, which will not have a material impact on its net tangible assets or earnings per share for the current financial year.
The contract with this customer has also been renewed.
As SingPost looks for Phang's replacement, Isaac Mah, now CFO of FMH, SingPost's Australia unit, has been named to replace Yik as the new group CFO.
SingPost chairman Simon Israel, who used to be the chairman of SingPost's largest shareholder Singtel, will "provide increased guidance to and exercise greater oversight" of the senior management team.
Phang, who joined SingPost back in 2019, plans to "vigorously contest" the termination / Photo: Albert Chua
"Space and latitude"
In response, Phang and Yik maintain that their termination is without merits, and was also procedurally unfair.
They point out in a joint statement that as required by the company's policy, in cases involving investigations carried out by group internal audit, they are to present the cases and give it "the required space and latitude" to conduct its work.
"The board has stated that we had failed to consider material facts in the case. The facts unfolded over time and the causative correlation and impact was not established immediately.
They maintain they had responded to questions "based on facts that were presented" to them at the time while "respecting the independent investigation that was ongoing."
"We acted immediately once the correlation and impact had been established. We categorically reject any suggestion that we were grossly negligent, had behaved inappropriately or had sought to misrepresent facts at any point," state Phang and Yik, adding that they will seek recourse against any allegations to the contrary.
Diverse views over divestment
Prior to this whistle-blowing issue, SingPost was most recently in the news for its multi-year turnaround bid.
As part of a broader "strategic review", SingPost has identified assets that it will put up for sale. The divestment of FMH for an enterprise value of A$1.02 billion was announced on Dec 2.
Upon completion, SingPost is expected to record gross proceeds of A$775.9 million of which A$362.1 million will be used to pay down the company's Australia dollar-denominated debt of some A$614.8 million as at Sept 30.
The divestment will also raise SingPost's net tangible asset per share to 68.9 cents.
By using proceeds to retire debt, SingPost can expect to significantly reduce its relatively expensive Australian-dollar debt costing 5% versus just 3% for Singdollar-denominated ones.
Analysts such as Jarick Seet of Maybank Securities expect the company to make further divestments, including the SingPost Centre, and potentially return up to 86 cents in the form of special dividends to shareholders from proceeds thus raised.
However, the sale of FMH has triggered concerns by other analysts, specifically, credit ratings agency S&P, which put SingPost on "negative" credit watch following news of the proposed divestment, citing "uncertainty" over future earnings prospects of the company.
S&P believes that with Australia accounting for the bulk of SingPost's earnings profile in recent years, the "loss of a key earnings pillar introduces uncertainty over the future strategy and earnings contribution."
"It also unwinds management efforts over the past four years to diversify the business from earnings in structural decline and build a second-home base.
"The strategic backtracking highlights the uncertainty over the future direction of the company, and calls into question the consistency and execution of the company's stated strategy," says S&P.
While it is a listed company, SingPost is also the national postal operator as well - a role it has played for more than two centuries - with the obligation to deliver mail.
Now, with postal delivery a business in a structural decline, SingPost has sought and received approval from the government to increase postage rates. To stem the decline in its domestic business, it has for more than a decade invested in overseas ventures to capture new growth.
SingPost shares closed at 56 cents on Dec 20, up 0.9% for the day and up 19.15% year to date.
