No Signboard: A billion reasons for board directors to shape up or ship out


    The Business Times, 30 August 2023


    THE connection of a former director of Catalist-listed No Signboard Holdings : 1G6 0% with a billion-dollar money laundering bust is the latest warning that companies should exercise greater care in their selection of directors.

    To be clear, investigations are still ongoing and the former director has not been found guilty of any offences. Nonetheless, his role at No Signboard should raise some eyebrows. What good is a director who appears to do nothing on a board?

    No Signboard on Aug 22 issued an announcement clarifying that Su Haijin was not involved in the day-to-day operations of the company.

    That is fair enough. Non-executive directors, as the name suggests, are not part of the executive management team.

    The company went on to add that Su also did not attend or take part in board meetings. He received neither remuneration nor fee, as he was non-executive and non-independent.

    No Signboard was probably trying to soothe rattled investors; yet, its response creates other concerns.

    How could a director who did not attend any board meetings throughout his tenure – from October 2021 to June 2022 – be familiar with the company’s operations and be in any position to give advice?

    According to a guide by the Singapore Institute of Directors, a non-executive director such as Su is expected to be familiar with the business and stay informed about its activities.

    They should also constructively challenge and review the performance of a company’s management, as well as participate in decisions on the appointment, assessment and remuneration of executive directors and key management personnel.

    One could argue that a director such as Su does not add any value to a company’s board.

    Su was appointed to the board following his acquisition of a 20 per cent stake in the company from controlling shareholder GuGong.

    Under such circumstances, an individual in Su’s shoes might have merely held the board seat to ensure his own interests are represented on the board.

    Even so, investors lose out if boards are made up of individuals who do little to help chart the path forward for companies.

    The wherewithal to acquire a stake in a company, or even control of a company, does not mean an individual will do a great job as a director.

    Back in 2020, two individuals acquired control of a company that now goes by the name Axington.

    The two, cousins by the name of Terence Loh and Nelson Loh, claimed they wanted to inject a business they had founded into the listed entity.

    That plan came to naught, and Nelson Loh has been charged with forgery offences.

    Such incidences should signal to companies and regulators that the existing checks and balances for directors are insufficient.

    Merely training a first-time director and ensuring the individual receives regular updates on matters such as new laws or regulation changes – as stated in the Singapore Exchange rulebook – will not deter motivated individuals.

    Perhaps, stringent screening should be a requirement before a board appointment. Boards may also need to be subject to occasional surprise checks and audits.

    Other members of a board, as well as regulators, should also be proactive in maintaining and even improving the quality of boards and board meetings. If necessary, efforts should be made to remove directors who are not contributing.

    Shareholders, too, should demand greater transparency. They should exercise their vote and signal disapproval with board appointments that don’t seem justified.

    When directors carry the primary responsibility of leading a company and discharging their fiduciary duties, shareholders must ensure these directors have the right attributes to fulfil their roles in the first place.

    In the event that they do not, there should be rules to ensure that these directors can be removed before irreversible damage is done.