Cover Corporate Governance Case Studies Volume six Mak Yuen Teen, PhD, FCPA (Aust.) Editor First published October 2017 Copyright ©2016 Mak Yuen Teen and CPA Australia All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of the publisher, except for inclusion of brief quotations in a review. The views expressed in this publication are those of the authors and do not necessarily represent the views of, and should not be attributed to, CPA Australia Ltd. Please contact CPA Australia or Professor Mak Yuen Teen for permission of use of any case studies in this publication. Corporate Governance Case Studies Volume Six Editor : Mak Yuen Teen, PhD, FCPA (Aust.) Editor’s email : [email protected] Published by : CPA Australia Ltd 1 Raffles Place #31-01 One Raffles Place Singapore 048616 Website : cpaaustralia.com.au Email : [email protected] ISBN : 978-981-11-0728-3 II Contents Foreword Preface Singapore Cases BROOKE ASIA: A SHORT CUT TO CONTROVERSY .................................................... 1 CELESTIAL FOODS: FROM HEAVEN TO HELL .......................................................... 14 MMP RESOURCES: HEADING TOWARDS A DEAD END? ......................................... 29 NATURAL COOL FACES HEAT................................................................................... 45 OSIM’S BUNGLED PRIVATISATION OFFER ............................................................... 58 SBI OFFSHORE: WASHED ASHORE ......................................................................... 71 THE FLIGHT TOWARDS PRIVATISATION: TIGER AIRWAYS ....................................... 83 SWIBER: THE SHIP HAS SAILED ............................................................................... 96 Asia-Pacific Cases BLACKROCK VS G-RESOURCES: ACTIVE TO ACTIVISM ....................................... 111 CENTRAL BANK OF BANGLADESH: THE BIGGEST CYBER HEIST IN ASIA ........... 126 CP ALL: A CASE OF INSIDER TRADING .................................................................. 138 SUCCESSION WARS: EVERGREEN GROUP ........................................................... 150 HANJIN SHIPPING: THE TITANIC OF KOREA .......................................................... 158 MEGA BANK, MEGA FAILURE? .............................................................................. 171 SAMSUNG BLEW IT ................................................................................................ 185 TATA SONS: UNRAVELLING THE MISTRY ............................................................... 201 III Global Cases THE COLLAPSE OF BRITISH HOME STORES ......................................................... 216 SNAP OUT OF IT! ..................................................................................................... 232 SAVING BIG (STAR)BUCKS ...................................................................................... 244 A VERY BLACK FRIDAY: TARGET’S CYBER SECURITY BREACH ........................... 258 THERANOS: THE UNICORN THAT LOST ITS HORN ................................................ 271 THE VIACOM BLOCKBUSTER ................................................................................. 285 WELLS FARGO: FORGONE REPUTATION? ............................................................. 303 IV Foreword V Preface About 15 years ago, when I founded the corporate governance centre at the NUS Business School, a well-known company director asked me why. Singapore had just released her first code of corporate governance not too long ago and as far as he was concerned, corporate governance will go the same way as some management fads. I thought the journey had only just started. Since then, interest in corporate governance has not waned at all. In fact, it has grown. Today, corporate governance is not only discussed in the context of listed companies, but also unlisted companies, charities, statutory boards, town councils, sports bodies, and other organisations. Similarly, interest in this annual collection of corporate governance cases, now into its sixth year, has continued to grow. More universities, professional bodies and other organisations involved in corporate governance education here and around the world are using the cases. Selected cases from volumes 1 and 2 have been translated into Chinese for the Hong Kong, People’s Republic of China and Taiwan markets. Volume 1 has been translated into Vietnamese, through a collaboration with the stock exchanges in Vietnam, for their listed companies. Some of the cases in this latest volume cover emerging themes such as cybersecurity and corporate culture, and for the first time, we have cases from Bangladesh, Taiwan and Thailand. There are 23 cases in total, eight of which are Singapore cases involving Brooke Asia, Celestial Foods, MMP Resources, Natural Cool Holdings, OSIM, SBI Offshore, Swiber Holdings and Tiger Airways. Some deal with corporate governance issues in situations such as a reverse takeover, privatization and insolvency. There is a mix of domestic and foreign listings. VI There are also eight Asia Pacific cases, including the Central Bank of Bangladesh case, G-Resources in Hong Kong, Tata Group in India, Hanjin Shipping and Samsung Electronics in South Korea, Evergreen Group and Mega Bank in Taiwan, and CP ALL in Thailand. The Central Bank of Bangladesh cybersecurity breach is considered the largest financial cybercrime in Asia. The G-Resources case deals with a rare display of public activism in Asia by Blackrock, the largest investor in the world. It is the first case which includes inputs from interviews with a central figure in the case. A number of cases deal with corporate governance in large listed family-controlled companies and groups, while the Mega Bank case is about a major money laundering scandal involving a bank with strong government links. The remaining seven cases are global cases involving companies outside of Asia-Pacific. Companies covered include BHS, Snap Inc., Starbucks, Target, Theranos, Viacom and Wells Fargo. Three of these cases – Snap Inc., Theranos and Viacom – concern companies having shares with different voting rights and allow discussions of the pros and cons of such share structures that some Asian stock exchanges are considering allowing. The Starbucks case involves a company which is widely admired for its ethics accused of reducing its tax through questionable means. BHS looks at corporate governance of a large unlisted UK company, whose collapse has raised issues about whether corporate governance rules applicable to listed companies should also apply to unlisted companies. The Wells Fargo case has the issue of corporate culture at its core. I would like to thank the students who wrote the original cases, the students who assisted in editing them, and particularly Isabella Ow, who did a great job as my editorial assistant. This initiative would not have been possible without the excellent support from CPA Australia and its team here in Singapore. In particular, I would also like to thank Joanna Chek for her excellent work on this volume, Sheryl Koh who had been consistently excellent over the first five volumes, and Melvin Yong for being a strong champion of this publication. Associate Professor Mak Yuen Teen Department of Accounting NUS Business School VII BROOKE ASIA: A SHORT CUT TO CONTROVERSY Case overview Between 2014 and 2015, Brooke Asia Limited (Brooke Asia) carried out a reverse takeover (RTO) with China Star Food Holdings involving a consideration of S$168 million through the issuance of 840 million new shares. The RTO came as a saving grace for Brooke Asia, which was facing an imminent delisting as it no longer met the Singapore Catalist Board listing requirements. The RTO was completed on 23 September, 2015. The sponsor of the RTO, PrimePartners Corporate Finance (PrimePartners), received partial payment in the form of 3.5 million shares, which accounted for 0.68% of China Star Food Group’s total holding. The objective of this case is to allow a discussion of issues such as the bundling of resolutions; roles and responsibilities of sponsors in listed companies; the impact of a RTO on various relevant stakeholders; design of remuneration schemes; and corporate governance issues relating to the board of directors and ownership structure. The rising star China Star Food Group Limited (CSFG), a Singapore-based company, was previously known as Brooke Asia prior to Brooke Asia’s RTO of China Star Food Holdings Group (CSFH) and CSFH’s subsidiaries. CSFG is primarily engaged in the manufacture of healthy snack foods in China. The Group’s main business is the production and sale of sweet potato snack food products.1 This is the abridged version of a case prepared by Ng Gau Wei, Gary Chia Zong Zhe, Soh Chi Loong Calvin, Rochelle Wong Xi Wen and Ng Jun Ting Shirley under the supervision of Professor Mak Yuen Teen. The case was developed from published sources solely for class discussion and is not intended to serve as illustrations of effective or ineffective management or governance. The interpretations and perspectives in this case are not necessarily those of the organisations named in the case, or any of their directors or employees. This abridged version was edited by Tan Zhe Ren under the supervision of Professor Mak Yuen Teen. Copyright © 2017 Mak Yuen Teen and CPA Australia. 1 Brooke Asia: A Short Cut To Controversy