Published May 11, 2009

DIRECTORS IN FOCUS
Busy times for independent directors of troubled S-chips

They face intense pressure as spotlight falls on companies' financial health

By JAMIE LEE
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THERE are some directors juggling multiple board seats. And then there are those who have their hands full with troubled S-chips.

China Sun Bio-chem Technology is the latest S-chip to hog the headlines for the wrong reasons.

The independent directors (IDs) raised concerns that a host of problems recently - including claims of a stolen truck holding the financial records and electricity cuts - could hinder auditors from verifying some 592 million yuan (S$126.6 million) in the accounts.

The directors, Lai Seng Kwoon, Teo Moh Gin and Loo Choon Chiaw, have subsequently passed a resolution to remove the chairman from his post.

Mr Lai is also the director of Oriental Century - of which former chairman and CEO Wang Yuean admitted to having inflated sales and cash figures for years - and China Sky Chemical Fibre.

Ownership of the latter company is now in question after it was revealed that creditors could seize the controlling shareholder and CEO's pledged shares.

Mr Teo is a director of Yangzijiang Shipbuilding Holdings and Sinostar PEC Holdings, while Mr Loo sits on the boards of China Milk Products Group and now-bankrupt FerroChina.

Other busy directors could include those from companies such as Fibrechem Technologies - whose auditors find difficulty finalising its 2008 accounts - and Sino-Environment Technology, which lost its CEO when he resigned after losing his pledged shares.

Company websites show that Fibrechem's IDs are vice-chairman of Provenance Capital Ong Tiong Seng, former CEO of Ang Mo Kio Hospital Chong Weng Chiew and former CEO of Xpress Holdings Lim Chin Tong.

At Sino-Environment, IDs include director at Beng Kuang Marine and ex-Member of Parliament Goh Chee Wee, as well as another Beng Kuang director Wong Chiang Yin.

Declining to be named, IDs who went through similar experiences told BT the pressure behind scrutinising the numbers. 'There are often extensive and frequent meetings and conference calls,' said the former director of a once-troubled S-Chip. 'I have seen these go on for days, weeks, at night and over weekends. The extent often depends on the issues at hand, and how conscientious the independent directors are.'

The director added that in some cases of fraud, IDs may have to 'effectively run the company'.

Another director, who was once part of a S-Chip hit by fears of accounting irregularity, said the experience 'was certainly stressful', noting that besides a nail biting wait for the auditor report, the media spotlight added more pressure to ensure that the financial matter was in the clear.

A third director of a currently troubled S-Chip firm said that dialogue with other parties can get 'frustrating and tense'. 'I pray a lot and trust the Good Lord.'