Not a week has gone by without Cordlife Group hogging the headlines ever since revelations of horrid lapses at its Singapore operations first surfaced last November.
With each passing week, the disenchantment among affected customers appears to have only gotten worse. Shareholders are no better off, having seen the stock tumble more than 70% over the last six months.
Long overdue disclosures of the lapses, alleged sabotage by former employees, police arrests of key personnel, potential class-action lawsuits by aggrieved customers, and a pair of controlling shareholders who can’t see eye to eye with each other.
Cordlife’s litany of problems, well documented in recent months, comes with all the trappings for what could be Netflix’s next hit TV series. Unfortunately for the private cord blood bank and its various stakeholders, the troubles won’t end soon.
Faith in the company — especially for those whose stored cord blood can no longer be used — has been decimated. Trust, once lost, is hard to win back, regardless of Cordlife’s repeated apologies and reassurances to do better.
Even the government has conceded that its hands are tied, with Senior Minister of State for Health Janil Puthucheary saying in Parliament earlier this month that the health ministry is not a party to contracts between customers and private cord blood banks.
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While shareholders have taken the first step to demand real change by voting in new board members backed by Cordlife’s largest shareholder, Nanjing Xinjiekou Department Store, it will take time for the new appointees and management team to nurse the company back to health. Newly appointed CEO Ivan Yiu, who took over from Tan Poh Lan, has assured that he will repair the damage and rebuild the trust.
The change of guard, which took effect upon the conclusion of Cordlife’s AGM on May 14, was proof that investors had had enough of the then-incumbent directors, many of whom were backed by the company’s number two shareholder, TransGlobal Real Estate Group, and included Cordlife co-founder Ho Choon Hou.
How did Cordlife end up in this mess with its self-professed mission to “provide reliable healthcare solutions through innovation, technological advancement and commitment to quality”?
Investigations to uncover the causes and parties behind its troubles are still ongoing, but one thing is clear from what is known: Communication across its chain of command was woefully inadequate.
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Even before the Ministry of Health’s spot checks last year, some of Cordlife’s management team members had already known in June 2022 that one of its storage tanks had been exposed to irregular temperatures for several days.
While immediate action was taken to resolve this, the incident was brought to the attention of its board of directors more than half a year later in February 2023. Why the board wasn’t immediately apprised remains a mystery.
To what extent this and other communication lapses contributed to its current fiasco remains moot, but this is certainly an area the company has to work on if it’s serious about bouncing back.
Ruckus at Metech
Cordlife was not the only company with a shareholder showdown that culminated in a board composition change this month.
Metech International, formerly Centillion Environment and Recycling, saw substantial shareholder Ng Cheng Huat expelled from its board at an EGM on May 11. Catalist-quoted Metech is involved in lab-grown diamonds, wholesale trading of metal products, supply chain management, and electronics recycling.
Ng, who has a 7.22% stake in Metech, was its non-executive chairman until November last year, when he was redesignated as a non-executive, non-independent director. His ouster from the board followed an exchange of written representations between him and two individuals in the lead-up to the EGM.
One of them is Metech CEO and executive director Wang Zhuo, who took the helm in May last year. The other individual, Cao Shixuan, is a manager at Metech and had offered to extend an interest-free loan of $1 million to the company in March to help tide it through until it gets back on its feet.
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Given the long list of grievances in the written representations, it’s not possible to get into all the nitty-gritty in this column. But suffice to say, there’s a mutual lack of trust between Ng and both Wang and Cao, with each side seeing the other as bad for business.
The company, which has been in the red for years, had revenue of only $26,000 for the six months ended Dec 31, 2023. Its latest balance sheet indicated cash of just $51,000.
Ng’s expulsion is one of multiple board reshuffles at Metech in recent years. Justified or otherwise, the frequent changes hardly inspire confidence in the company, which is struggling to remain a going concern.
One of Metech’s most high-profile setbacks involved missing lab-grown diamonds manufactured by its joint venture with X Diamond Capital, a Singapore-based jewellery wholesaler. Metech blamed the director of its joint venture partner, Deng Yiming, for the missing diamonds, even taking legal action against him before eventually settling out of court in December last year.
Raising the bar
In the nine years I’ve been an investor relations consultant and 15 years before that as a financial journalist, I’ve come across a fair share of companies heedlessly destroying shareholder value.
For some, the fallout could have been avoided or mitigated had there been better internal communication, whether at the board level, between the management team and the board, or across the entire organisation.
Better communication entails having meaningful and forthright discussions, keeping the relevant parties in the loop, and questioning key decisions if warranted.
I’ve encountered cases of C-suite executives pandering to the whims and fancies of their companies’ founders or controlling shareholders with no questions asked.
I’ve also encountered CEOs wary of sharing too much information with their board for fear of being grilled or put on a tight leash. Independent directors not trusting executive directors or members of the management team, and vice versa, is also not uncommon.
Getting leaders, including board directors, to be more accountable can only benefit businesses and shareholders. How to do so is the million-dollar question.
In seeking to raise the bar for directors, the Singapore Institute of Directors launched an accreditation programme on May 10 that it says is designed to help participants uphold high corporate governance standards.
Besides passing a series of exams, directors must comply with a code of conduct and commit to continuous professional development to remain accredited.
While commendable, whether and to what extent accreditation raises the bar is anyone’s guess. Exacting greater accountability from custodians of companies listed in Singapore is still largely a work in progress despite the slew of carrots and sticks already in place.
For some investors, a bet on a company is, in essence, a bet on the people behind it. It can be hard sometimes to tell whether the folks running and overseeing the business are the real deal. Shareholders should take every opportunity to engage with their companies’ leadership.
AGMs are a good starting point. All too often, resolutions on directors seeking re-election or candidates being put forward as first-time directors are passed without them uttering a single word.
Board members and aspiring directors should be made to explain in front of shareholders why they deserve to be re-appointed or join the board. Many shareholders, unfortunately, let the moment pass them by.
Boards should also disclose their key performance indicators at AGMs and whether they have been met individually and collectively by their members. Any deviations or shortfalls should be explained.
Cordlife and Metech will not be the last companies to rub investors and other stakeholders the wrong way. Let’s hope we see fewer of them as we all play our part.
The writer is a former financial journalist and runs an investor relations consultancy practice. He is also a part-time business journalism lecturer at a Singapore university. All views expressed are solely his
