Following Saturday’s disclosure by Keppel Offshore & Marine that fines amounting to US$422million are to be paid as part of a global resolution for a cross-border corruption probe, the conversation over the long Christmas weekend in Singapore extended beyond the embattled O&M sector to touch on issues of governance and even national reputation.
Resetting the Tone at the Top
On December 23rd the Business Times reported that Keppel O&M’s former agent was ‘the weakest link’ in the chain of compliance and that his corrupt payments were made with the yard group’s senior executives approval or knowledge.
Ho. Ho. Ho. Fines across three jurisdictions of almost half a billion US$, a 5% fall in the share price on the first day of trading not to mention significant reputational damage, are hardly business as usual for what is Singapore’s most global corporate brand.
This is because Singapore Inc’s reputation for high standards of governance is in part exemplified by Keppel’s comprehensive frameworks for risk management and internal controls as overseen by its Audit and Board Risk Committees. The company’s latest annual report contains the following introduction to regulatory compliance.
This is part and parcel of life for companies seeking to break into an emerging economy and aspiring to cultivate local capabilities.
Keppel’s success and reputation is rooted in a firm commitment to doing business the right way. The tone for regulatory compliance – zero tolerance for fraud, bribery, corruption and violations of laws and regulations – is set at the top.
To Keppel’s credit, the top of the organisation was swift to acknowledge the gravitas of the situation. Keppel’s CEO, Mr. Loh Chin Hua, firmly reset the tone for the task ahead:
It has been a very painful chapter for Keppel and the thousands of hard working and honest colleagues we employ in Singapore and around the world. We must now work hard to win back the trust our stakeholders have placed in us and demonstrate our determination to hold ourselves to the highest ethical standards everywhere we operate.
A more Palateable Performance for Singapore Inc
The situation facing Keppel is clearly different from the legacy fall-outs of corporate Japan where each week brings a fresh debacle and corporate soul searching over a loss of national prestige. It also pails in comparison to the VW emissions scandal that erupted in 2015, eventually wiping billions off the share price and the value of the VW brand.
During the third quarter of 2017 Singapore’s corporate governance standards had hit an all-time high based on the average scores under the Singapore Governance and Transparency Index (SGTI) published by CPA Australia, NUS Business School’s Centre for Governance, Institutions and Organisations (CGIO), and the Singapore Institute of Directors.
Keppel ranked 5th overall with the top three slots going to other Temasek-linked entities Singtel, CapitaLand and DBS.
Of particular note were improvements in board & director assessment, potential conflicts of interest and whistle-blowing policies. However, in 2017 only 8.7% of the 606 Singapore listed companies and 42 Reits and business trusts ranked in the index disclosed anti-corruption programmes compared to 12.2% in 2016.
Resolute in the New Year
Keppel is a company with a strong brand culture underpinned by resilience. It is unlikely to squander the lessons learned from this latest chapter in its long history. Instead, as the Group prepares for its 50th Anniversary in 2018, there is an opportunity to set new standards in governance and regulatory compliance and lead the way for Singapore Inc globally.
One New Year’s resolution for Asian companies seeking to not just set the tone at the top but to nurture a culture of sustainable performance is to consider the role of brand purpose as a means of unifying stakeholders around a shared cause. The opportunity goes beyond building businesses to building belief in the future.