Date: February 14, 2024
To: Chairman and members of the Board,
Chemical Industries Far East Limited
It has come to SIAS’ attention that the company’s transition to professional management may have encountered significant challenges. In the 2023 annual report published seven months ago in July 2023, the chairman expressed optimism about the company’s transition from a family-run entity to a professionally managed organisation with the appointments of professional senior managers. The recruitment of external personnel with established track records in multinational corporations to fill key leadership positions such as CEO and COO was a positive development.
However, it is concerning to note the successive departures of these individuals. Between October and December 2023, the group announced the cessation of the newly appointed chief executive officer, chief operating officer, and sales & marketing director. Of particular concern is the attributed reasons for departure, with the CEO and COO citing “self-interest and personal goals” in their cessation announcements on SGXNet. The CEO and the COO were only appointed on 1 Sep 2022 and 5 Sep 2022 respectively while the sales and marketing director joined the group in December 2022. Additionally, the impending resignation of an independent director, Mr. Tay Kin Bee, further exacerbates the situation, reducing the board to just four members, including Mr Lim Soo Peng, the non-executive, non-independent emeritus chairman.
SIAS is deeply concerned by these developments and the resultant vacuum in senior management, which undoubtedly poses operational risks for the group. SIAS notes that, under the leadership of the then-interim CEO who did not appear to have any background in the industrial chemical segment, the group claimed that it had “…little alternative … had no choice but to contract at a peak price amidst uncertainty with supply issues amongst [electricity] retailers.” The two year contract doubled the group’s cost of electricity as a result and has led to losses for the group. (See https://links.sgx.com/FileOpen/20230724_CIL_Ann_SIAS_QNA%20FY2023.ashx?App=Announcement&FileID=766241)
In light of these developments, SIAS urges the board to address the following questions:
1. Will the board, especially the nominating committee (NC),conduct a thorough review to understand the reasons behind the high attrition rate among senior management and assess the corporate culture contributing to this trend?
2. Could the board elaborate on the extent of the emeritus chairman’s involvement in daily operations? What is the working relationship between the emeritus chairman and the CEO and COO and how has the emeritus chairman facilitated the CEO and COO in their respective roles?
3. How is the board/NC carrying out the search for a new CEO and COO? What criteria is the NC using for the CEO and COO roles and what progress has been made?
4. With the CEO and COO serving their notices until 31 March 2024 and 11 April 2024, how will the board ensure the continuity of the group’s operations? Please provide an update to shareholders on the group’s operations and its business continuity plans.
5. In the event of new managerial hires, what measures are being taken to ensure the stability and continuity of leadership within the company, particularly in light of the high attrition rate of senior management personnel?
6. Can the board provide clarity on the company’s strategic direction amidst the current leadership void and operational challenges? How does the board intend to help the group navigate these challenges and steer the group towards sustainable growth and profitability?
7. Management has also started to re-evaluate the use of the group’s properties at Upper Circular Road and at Carpenter Street. Has this initiative been completed or will this be delayed due to the cessation of the senior management team?
SIAS believes that clear and proactive communication from the board and management is essential in times of uncertainty. We urge the board to address these concerns promptly and comprehensively to restore confidence among shareholders and stakeholders alike. If a meeting is required, we are more than happy to meet you.
David Gerald
Founder, President & CEO
SIAS
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