The panel takes place at a time of change for Singapore’s capital markets, marked by regulatory reforms, notes moderator Wilson Chew, managing partner at growth advisory firm JP Wilson.
Loh’s fellow panellist, Chew Sutat, chairman of Shan De Advisors and former member of the Singapore Exchange’s (SGX) executive management team, agrees. A director’s responsibility and priority is to “always act” in the company’s best interests. If disagreements arise, directors should seek advice and work to shape outcomes that benefit the company. Even if this leads to a director not being re-elected at the next annual general meeting (AGM), this “doesn’t mean you don’t discharge your duties now”, he adds.
To Rachel Eng, managing director of Eng and Co, discussions and debates within the board are “highly encouraged”. “Sometimes disagreements happen [among directors], and it happens quite often,” she says.
This is why keeping a record of meetings, particularly on “anything material”, is important. After all, there will always be an “opportunity for discovery” should a situation arise in future, Chew adds.
See also: ‘Water under the bridge’? SID panel discusses CDL saga, restoring trust
Loh cites the recent board dispute at City Developments (CDL) as a case in point. The controversy stemmed from the appointment of two independent directors without involving the nominating committee. The board became divided into two camps, each aligned with executive chairman Kwek Leng Beng and his son, group CEO Sherman Kwek.
Directors Philip Yeo, Colin Ong and Chong Yoon Chou were in the elder Kwek’s camp, while Philip Lee, Wong Ai Ai, Desbaillets Daniel Marie Ghislain and Carolina Chan backed Sherman.
These disagreements were documented “very painfully and very accurately” with elaborate detail, says Loh. “And I think that is very important that… these different views were all highlighted in the corporate governance report as one of the explanations for the non-compliance… These were all documented in the annual report without fear and favour.”
These records were “important” so that all stakeholders could make their assessment of the situation. “There’s no supreme authority that can say this explanation is good or bad, but it’s up to the stakeholders to decide,” Loh adds.
Following the very public disputes, CDL’s board announced on March 12 that they have “agreed to put aside their differences for the greater good of CDL and its stakeholders.” At its AGM on April 23, the new independent directors were voted in with approval from over 90% of CDL’s shareholders.
Although keeping detailed records is important, any inflammatory comments and potentially defamatory statements arising from heated meetings should be left out of the record in case of defamation suits, says Eng. However, if board members find themselves alone in their decision in the event of a board disagreement, directors should take their own notes and “collect whatever evidence [they] have.”
No room for guesswork
When differences in opinion arise, John Lim, honorary fellow and former chairman of the SID, believes independent directors are often disadvantaged compared to company founders or owners who have more intimate knowledge of the business.
To this, Chew notes that directors should question their potential contribution to the board if they are unfamiliar with the company’s business.
While he acknowledges there are instances where directors join the boards of companies they may not know well enough, it is “imperative” for all directors to take the time and effort beyond the requisite meetings to understand and learn the company’s business as well as their management team.
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At the same time, management should give the board enough information to make informed decisions based on the facts. Directors also have the right to seek further details where needed.
Eng adds that informal gatherings with a company’s management team can be invaluable, especially when directors are sometimes tasked to select the company’s next CEO. Beyond the board, directors should take the time to know people outside of it, she says.
‘Subgroup think’ versus lone wolf
Within the board room, members should be mindful of having “subgroup think”, where factions form within a larger board, says Loh. Decisions, he adds, should be assessed based on merit and not based on affiliations. Besides, disagreements should not necessarily translate into a dissenting opinion.
When disagreements happen, Chew says all directors should exercise their vote as it is their right and their job, instead of abstaining. The worst that can happen is you’re the only one voting for the decision, and “so be it”, he says. “You are on record not having acquiesced to whatever the issue may be on hand,” he adds.
While being the lone voice disagreeing on a subject is like an “egg hitting a rock”, Loh says there are other alternatives to speak up on decisions, such as being an internal whistleblower. The other way is to leave the board and speak up from outside to change the situation.
Be sensitive to the dynamics
The panel discussion focused heavily on family businesses, and with good reason. Wilson says they make up over half of SGX-listed companies and account for around a third of Singapore’s market capitalisation.
“Family business is big business. It is serious business. We all, at one point or another, may be invited onto a family business that is publicly listed,” he adds.
Directors of family-owned businesses must also be attuned to family dynamics. Professor Marleen Dieleman of the International Institute for Management Development (IMD) Business School figures that most family firms in Singapore are decades old and are in a phase where the second or even third generations are taking over, thereby causing room for conflict as different stakeholders grapple with power dynamics. “It’s a bit like (the song) Hotel California. You can check in, but you can’t leave,” she adds.
“As a director, you need to be sensitive to what’s happening in the family,” Dieleman notes, adding that discussions within families can go from constructive to destructive in the blink of an eye. Directors have a responsibility to keep abreast of these matters.
It is important to set up due processes, structures, infrastructure and a culture where key decisions are made in settings accessible to all directors. In family businesses, “key decisions are not made in the boardroom but in the dining room”, adds Loh, which can be quite “dangerous”.
In any case, it’s also important to understand which member of the family is responsible for making important decisions and who may or may not be on the board. It is useful to map out the entire workings of the family business and understand the strategy that the family has in mind, says Dieleman.
Voting power and shareholding may also be spread among the family members, as families can have their constitutions, which run separately from corporate governance, so it is important to locate who represents the family in key decision-making and within the shareholder group.
Conflicts between close family members should also be managed carefully, as they do not mean the matter is over once the court cases are closed, says Dieleman, referring to CDL. “If you lose trust among family members, it takes time to rebuild that trust,” she adds.
The votes may have reflected CDL’s shareholders’ views on the matter, but part of it may be a “matter of the heart” instead of something for the rule books to be applied to, says Chew.
Fit the board
When asked what to consider before joining a company’s board, several key points emerged, chief among them a clear understanding of the business, industry and company fundamentals. Eng says it’s important to join industries where you understand the operational language and to know who the other directors are, especially the independents.
Equally vital is understanding the company’s financials, she adds, as directors could be held liable if the company is losing money or facing insolvency.
For Loh, consistency, diligence and leadership are aspects he would evaluate before joining a company’s board. “The first thing is consistency; is the business [and] the process consistent with my personal belief [and] aspiration?” he says.
Loh’s second consideration is “due diligence”. “Talk to the nominating committee, talk to the key stakeholders, have a sense of the external [and] the internal view of what this company is about.”
His final word of advice is to “assess the leadership”. “Talk to the executive, assess what they are doing well and reflect on what they are doing; are they principled in the way they do their daily conduct of running the business? So, consistency, diligence and leadership — CDL.”
Chew also had his own set of acronyms, CAP, which stands for clarity, alignment and purpose. “Before you join a company’s board, you need to have clarity,” he explains. “What is it you think you can contribute to the board? That’s very critical… and having that clarity is helpful.”
Alignment matters, says Chew, as it reflects the synchronisation between personal aspirations and the company’s direction. This sense of alignment fuels purpose, motivating both the highs and the lows.
On really bad days, one should also make sure that the board buys liability insurance, as “justice doesn’t come free”, adds Eng.
Should directors talk to the media?
With a diverse ecosystem of professionals and external parties offering objective perspectives and ensuring regulatory compliance, board members should resolve issues internally. If necessary, other forums and regulatory bodies such as the Accounting and Corporate Regulatory Authority (Acra), SGX and SID can be called upon to mediate.
Ultimately, leaking information to the media to influence boardroom opinion should never be an option, says Chew, due to the risk of damaging the company’s reputation.
When opinions and news are made public, perception can quickly spiral out of control, notes Wilson. If the company’s management issues a statement, it should include both majority and minority views to provide a balanced perspective, adds Eng.
