Independent directors can continue sleeping on the job

Chief Justice Chan Sek Keong’s recent acquittal of two former board members of Airocean Group should make it harder to prosecute independent directors of Singapore-listed companies.

He made it clear that companies may not have to disclose information because it is trade (business not market, I assume) sensitive: the information has to be likely to significantly move the share price as well. And directors in most instances should not be expected to question professional advice that they receive with respect to how they discharge their duties.

Independent directors were scared after a district judge convicted former Airocean independent directors Peter Madhavan and Ong Seow Yong on charges related to disclosure lapses from 2005 relating to the corruption investigation of ex-Airocean chief executive Thomas Tay.

Another nail in the coffin of our regime of disclosure. If can suka-suka no need to dislose WTF! I prefer DJ’s reasoning. Hope AG “appeals”.

S-Chip after S-Chip shows that corporate governance didn’t work. Yet independent directors never ever were held accoutable except in one case: directors there were slapped lightly on the cheek by SGX. WTF!

Directors: Don’t play play, be diligent

(Latest 18/10/ 2014: High Court has set aside the conviction of former Airocean chairman Ong Chow Hong for failing to use reasonable diligence in the discharge of his duties as a director of a company, saying it would “constitute a serious injustice” if the conviction were allowed to remain, considering that other directors involved in the case have since been acquitted of their charges.– See below)

Directors cannot “abdicate their responsibilities under the pretext of delegation” to other directors with specialised knowledge. The law will hold them responsible even if an issue falls outside of their area of expertise.

This was the message the High Court gave last week when it doubled the one-year disqualification order imposed on Mr Ong Chow Hong for failing to use reasonable diligence in the discharge of his duties when he was a director of then-listed company Airocean Group in 2005.

The SGX had halted trading of Airocean shares and asked for clarification on a media report that said the CEO was being investigated by the Corrupt Practices Investigation Bureau.

A directors’ meeting was convened but Mr Ong missed it to attend a golf function. Airocean sent out a “misleading” public statement later that night, which led to three other directors being charged. Their cases are still before the courts.

Appeal Judge V K Rajah said Mr Ong, had “committed nothing short of a serious lapse in entirely abdicating his corporate responsibilities … One would think that any competent director would immediately comprehend the pressing urgency and significance of (the SGX’s) query and the critical need to respond accurately and promptly.”

“The gravamen of the charge here is that the appellant consciously abdicated from his responsibilities; he never asked to see the draft announcement before it was released to the public, and was quite content to delegate his responsibilities to another director.”

Justice Rajah said the public must be protected against all errant directors “by an uncompromising reaffirmation of the expected exemplary standards of corporate governance”, referring to the court’s discretion to impose disqualification orders that would be “sufficient to deter serious lapses in corporate behaviour”.

During the appeal hearing, Justice Rajah noted that the law “does not impose the obligation for directors to get it right all the time but it requires directors to exercise due diligence, that you must participate if called upon”.

Directors have to “bring to bear their own judgment” in evaluating advice received from professionals and not “seek shelter behind other specialised directors” even if they are not experts in that issue of concern.

Update on 18 October at 10.30 am

Today: 16/10/ 2014

The High Court has set aside the conviction of former Airocean chairman Ong Chow Hong for failing to use reasonable diligence in the discharge of his duties as a director of a company, saying it would “constitute a serious injustice” if the conviction were allowed to remain, considering that other directors involved in the case have since been acquitted of their charges.

The charge was in relation to Mr Ong having approved the release of an announcement by Airocean Group in November 2005 to the Singapore Exchange without first having sight or knowledge of the statement.

Mr Ong had pleaded guilty in 2009 to not having exercised “reasonable diligence” in the allegedly misleading press release related to the company’s chief executive officer being in a corruption probe.

Then, the prosecution’s statement of fact said Mr Ong “chose to turn a blind eye and deliberately distance himself from an act of the company … that can have an impact on the investing public”.

Mr Ong was eventually fined S$4,000 and disqualified from taking part in the management of any company for two years.

Yesterday, Judge of Appeal Chao Hick Tin allowed a criminal revision petition by Mr Ong and set aside his conviction, ordering that the fine, which Mr Ong had already paid, be refunded to him.

“For the petitioner to remain convicted, whereas the rest of Airocean’s board of directors were acquitted of the charges against them, would be grossly unfair and would not be commensurate with the relative culpability of the petitioner as compared with the other directors who had approved of the announcement,” said Justice Chao.

In arriving at his decision, Justice Chao reasoned that there had since been a pronouncement by the High Court in a case involving the other Airocean directors that the announcement was not misleading in a material particular. He also noted that the fact that Mr Ong had pleaded guilty did not preclude him from bringing a petition for a criminal revision.