Baffling C-suite resignations are never a good thing

Baffling C-suite resignations are never a good thing

HIRING and firing the chief executive of a company is the prerogative of the board although one is always trickier than the other. It is also the most important task before a governing board that has far-reaching consequences.

While it may be easier to defend the removal of a bumbling chieftain when a company's fortunes are flailing, the task requires some deft communication if the boss is performing up to scratch.

After all, aren't promising financials and shareholder value creation the all-important benchmarks for a board to judge the chief executive's performance? Not always, as it turns out.

The abrupt resignation of Cordlife Group's chief executive Jeremy Yee a week ago is one case in point. As a CEO, Mr Yee - a true-blue Cordlifer who has served the firm since 2002, one year after its inception in various capacities - appears to have ticked all the right boxes.

The company's latest annual report with highlights of milestones between 2012 - his first full financial year as Cordlife CEO - and 2015 may be an incontrovertible proof of that. Over this time, Cordlife scored a mainboard seat on the Singapore Exchange, basked in acquisition-fuelled growth in Malaysia, India, Indonesia and the Philippines and orchestrated a slick investment in China's largest cord-blood banking firm that is listed in the US and three years later, pocketed handsome gains by unloading and monetising the asset. The stock hit a high of S$1.67 in late January this year (it closed at S$1.29 on Wednesday), and has long ditched its IPO price levels of 49.5 Singapore cents in 2012.

Last year, this Singaporean home-grown company that was once listed on the Australian Stock Exchange and then later broke away and listed on SGX, even made it to Forbes' vaunted list of Asia's top 200 "Under a Billion" firms.

The headline figures are fetching - revenue has doubled from S$29 million in FY2012 to S$58 million in FY2015 while net profit has nearly quadrupled from almost S$9 million (before one-off IPO expenses) to S$32 million over the period.

Given Mr Yee's excellent record and his optimism just a month ago that the firm was poised to tap the tremendous growth opportunities of the cord blood and cord lining banking market, why did he resign to "pursue other interests?" It is for this reason that there is a growing sense that boardroom intrigues could have led to his departure.

On Monday, the Securities Investors Association of Singapore (SIAS) issued a statement that based on its request, Cordlife board has agreed to clear the air over Mr Yee's resignation at a soon-to-be organised dialogue session with shareholders.

The SIAS also said that it was briefed by Cordlife's chairman and vice-chairman that the next phase of Cordlife required a "different leadership" and that it was optimistic of finding a new CEO.

This leadership gap occurs when the company has embarked on a major merger and acquisition - it launched a conditional takeover offer for Malaysian-listed StemLife Berhad last November; as at the closing date of the offer in early February, the offer has drawn valid acceptances of a nudge below the 90 per cent threshold it was aiming for to fully acquire the company. Where to from here?

A responsible board would have had a ready-at-hand emergency succession plan for the CEO. In this instance, there was none. Why?

Could the board have been more forthcoming on Mr Yee's departure since the announcement over a week ago? Do shareholders and the firm's employees deserve to know why and how their captain left the ship, more so because it's a highly material event?

Absolutely. These are nuances that a firm that has snagged "most transparent" company award twice over the years could have taken time to manage and respond to without the prodding of the SIAS.

These are also answers that the board had better readily equip itself with at the next stop with some truly disgruntled shareholders.

anitag@sph.com.sg


This article was first published on March 31, 2016.
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