Sometime in April of this year, I decided to write a piece on a quote by Prince Charles, the heir to the British Throne, which was entitled “ALL THE TIME I FEEL I MUST JUSTIFYMY EXISTENCE.” I felt that the quote was post-worthy because it summed up a fact of life and the fact that a man who didn’t have to worry about money was conscious of that was worthy of my few cents of comment.
The vast
majority of us need to work to put food on the table. Work involves justifying one’s
existence to a party paying the bills. Business people are always trying to
prove that their product or service makes life better for customers. Employees constantly
need to prove that they are of a value to the system. In a funny way, this is
easier when you’re at the bottom of the food chain. If I take myself as an
example, my value to my day-job boss is simple. I am strong enough to lift boxes
of documents and I don’t have an issue traveling to industrial estates. To my
restaurant job bosses, my value is simple – I’m the guy who brings food from
the kitchen to the table.
I’m not
terribly well paid because it’s been argued that the value of my job
(particularly the night one), because the theory is that anyone can do the job
I do, and probably at a cheaper price. Hence, to do the job I do, my value needs
to be a little more than just moving dishes from point-to-point. Immigration
laws protect me in as much as I have the right citizenship and employers need a
certain number of locals on the payroll to hire “exploitable” labour. I also do
things like I do my best to push booze sales so that I can tell my employers
that I make them enough money to pay myself.
It’s easy for me
justify my value because it’s easy to describe what I do. However, its also
easy for my employers to remove me. They just need to feel that business has
slowed and that they can get someone cheaper. Should that happen, removing me
from my sources of income would be fairly easy.
However, it’s a
different story as you climb higher up the food chain. What exactly does a CEO
or a minister do to justify his or her existence to an organization? It’s hard
to pin down the individual at the top’s efforts have a direct effect on anything
in particular. However, the argument goes, that whatever people at the top are
doing, its exceedingly valuable and the value they provide is something only
they can bring and therefore worthy of a lot more pay than whatever people at
the ground are making. We’ve used this argument for the longest time in
Singapore whenever it comes to talking about government salaries.
The answer that
the people at the top “create value,” which means that the rest of us have jobs
to go to and therefore get to have a better life than we would have otherwise. In
Singapore, the argument goes that we need to have the world’s highest paid
ministers because we need to attract super competent people to run the show and
we don’t want them to turn corrupt. We also argue that we need to share the
brains between the public and private sector so that all sides of the economy
benefit.
I’ve argued on many
occasions that I don’t disagree with this on the surface. Why should the bright
and brainy not enter public service and get well paid for it. Why can’t smart
public servants be tapped to run public listed companies if they can deliver
value?
Where I do
question this policy is on two fronts. Firstly, are we really getting the best
and brightest and what happens when they fail to deliver “value.”
Let’s take the “CEO’s”
job as an example. Modern management theory has it that a CEO is appointed by
shareholders to make them money. In the USA, this has led to the use of stock options,
which are supposed to make a CEO’s interest aligned with the shareholders who
have hired him (they’re usually men). This has created multimillionaires across
the board and whenever someone talks about outrageous pay of CEO’s when
compared to the average worker, the retort is that the bulk of the CEO’s pay is
from stock options and the CEO is only taking a fair share of the wealth he
helped to create for shareholders (which does include mutual and pension funds,
which workers invest in).
Since, this has
been the standard measurement of people at the top, let’s see if this applies
to Singapore’s top brass. Have they created vast amounts of wealth that their
American counterparts claim to have done?
Let’s take Mr.
Ng Yat Chung, the CEO of Singapore Press Holdings (SPH), who is about to do his
shareholders a service by selling the company to another Singapore government-controlled
conglomerate called Keppel Corporation (Keppel). When the story broke on 2
August 2021, it was mentioned that the offer by Keppel provided SPH shareholders
with a 40percent premium of the last traded share price of $1.50 per share. The
report can be found at:
https://www.businesstimes.com.sg/companies-markets/keppel-makes-surprise-s22b-bid-to-privatise-sph
So, it looks
like Mr. Ng has done what few imagined would be possible in the current market –
he’s delivered “value” or “created wealth” for the shareholders who hired him.
As a former Chief of Defense Force (CDF), you could argue that by creating “value”
for SPH’s shareholders, Mr. Ng has proven the Singapore government’s point of
the need to share “value-creating” brains between the public and private
sector.
Unfortunately,
if you look at things more closely, Mr. Ng hasn’t exactly done that. When Mr.
Ng took over as CEO of SPH in September 2017, SPH’s shares were hovering at
around $2.76 per share. At the time of the announcement of Keppel’s take over,
the share price was hovering around $1.88 per share. If you look at the chart
of SPH’s historical share price, it’s very noticeable that SPH’s share price
has been on a gradual decline from the day Mr. Ng took over.
https://sginvestors.io/sgx/stock/t39-sph/share-price-history
Copyright SG
Investors.io
If you look
through the share price of SPH in the years that Mr. Ng took over, its very
clear that what Mr. Ng has done has been to manage the decline of SPH rather
than to create new value adding paths to prosperity for SPH.
One can argue
that Mr. Ng was unlucky in the sense that the main business of SPH has been in
the print media, which has been on the decline for over a decade. You could
argue that it’s just an industry trend and Mr. Ng had bad luck. When the announcement
came in May 2021 that SPH would be hiving off its media business into a
non-profit company, the government came to his image repairing issue. Our Magically
Unconflicted Writer and Enforcer of Laws went as far as to say that there was
nothing wrong with governments helping out media businesses:
Unfortunately,
Mr. Shanmugam is not exactly correct as can be seen by a comparative share
price of some other media companies. Take News Corp, owned by Rupert Murdoch,
which has seen its share price rise since 2017 when the share price hovered
around US13 per share and at the time of writing now trades at around US$23 per
share.
https://finance.yahoo.com/quote/NWS/chart
Of course, News
Corp has a variety of businesses and is an international company, so one can argue
that its TV and radio business does offset whatever happens in the print
business.
However, if you
look at another company, whose business is to publish a news paper for a
financial centre, you’ll also find that the picture does not favour Mr. Ng’s
management of SPH. The New York Times Company Limited, which publishes the New
York Times saw its share price go from roughly US$18 per share in September
2017 to roughly US$43 per share in its most recent trade.
https://finance.yahoo.com/quote/NYT/chart?p
How did these
companies expand and grow in tougher markets, whereas SPH failed to grow and in
fact declined in its domestic market? There’s no way Mr. Ng could not have seen
that his main flagship product was declining in a three-year period and that he
could have taken some remedial action.
Are the people
on the top really creating value for the rest of us or are they playing
semantics to make us assume that some form of value is being created. It’s a question
that we could all do well to consider.
No comments
Post a Comment