Time to be really stupid about DBS – after Richard Stanley

I want to repeat, firstly, the comments posted in a previous blog, that when a man dies, you leave him alone and you remember all that is the best about him. I have known Richard Stanley casually since about 2002 when we kept running into each other in China. Whether or not he was the best possible choice of CEO for DBS is now a moot point. He was not in essence a personal friend, and so my assessment of him is limited to the professional arena.

But I do want to remember that in my honest view, he was in essence a good man. A very good man. He was a suitable point man for Citibank in China, taking all the hits that the regulators were throwing at the bank as it slid in the quality of its operations. He was an exemplary, very lucky and very happy family man. But most of all, he was a man who did the best he could in all that was given to him. So, even as I take issue with DBS for having appointed him as CEO, I would not fault him for having taken the job and doing what he could in his own special way.

Those who have worked with him remember fondly that he needed help in being organised, but no help in dealing with people of all nationalities and ranks. He was a star with people. That was his special gift. When someone like Richard passes away, you recognise the void immediately, the roles that only someone as pleasant as he was and no one else could have played in the scheme of things.

Which now brings me to someone who is very much alive and needs some immediate attention. Mr Koh Boon Hwee, the chairman and CEO after Richard Stanley illness was revealed early this year.

I think that the first and immediate questions that we need to ask Koh again and again until we see some clarity are:
– When exactly did you know that Richard Stanley was probably not going to make it?
– In hindsight, why were you so optimistic in your comments that Richard was going to make it, when the prognosis for acute myelogenous leukemia is usually not good?
– Was Francis Rozario ever brought into dialogue with the bank and at which stage and for what reason? Were you telling shareholders one thing, that you are holding the fort for Richard, but indeed negotiating something else – his succession – behind the scenes?

His answers to these questions are very important because now that Richard is dead, we snap our fingers and wake up from the trance we have been put into the past few months – that Koh Boon Hwee and Koh Boon Hwee alone will be the answer for DBS going forward.

We – meaning shareholders, analysts even employees – have ourselves to blame for allowing Mr Koh Boon Hwee to lead us to believe that all he was doing was holding the fort for Richard Stanley’s return.

Nobody, not the media, not the analyst, nor the shareholders at the recent annual meeting, ever pushed the SUCCESSION question. How could it be? That’s how weak we are. My colleagues who attended press conferences with Mr Koh tell me that the question of succession was indeed asked in several different ways, but that every time he managed to side step it.

Why was the succession plan not put into place and if there was one, why was it not communicated? Because Mr Koh was enjoying himself too much as the undisputed CEO making all the decisions and putting all the pieces in place as he saw fit?

This is the country where the government has built an incredible reputation for being open about disruptive matters. When the current prime minister Lee Hsien Loong and a former very popular president, Mr Ong Teng Chong were diagnosed with cancer, both in 1992, the government came out very transparently, giving the public a very clear account of their conditions and led us through their chances of survival.

When many governments around the region were mucking around with their numbers during the SARS pandemic, this is also the government that led the way in showing that dealing with the numbers in a transparent and objective manner was the best way to garner public cooperation, instead of hiding away for fear of losing tourist revenue.

Most recently, as the great global crisis deepened in the region, the Singapore government was the first to come out admitting to the possible downside risks and working that into their projections. So even as other governments in the region were thinking that the situation in Singapore was worse than their own countries, they fell one by one themselves.

In the light of this high level of quality in dealing with the truth of any important situation of public interest, the quality of disclosure from DBS in the past few months, whether inadvertently or otherwise, brought us right back to the stone ages.

What we were getting these past few months were, “Don’t worry, I am holding the fort as CEO while he is away. Don’t worry, I am not going to change anything.” Let’s snap our fingers and come out of our trance – the standards of disclosure we should expect from DBS and its chairman are much higher than what we got.

I don’t think that many people catch on to why I am irked by the quality of Koh Boon Hwee’s words in a number of situations. I know that some people in official circles think that Mr Koh Boon Hwee is brilliant. I am sure he is, but even if he is, why should he go without scrutiny? Deep, rigorous scrutiny.

For example, he was quoted in the local newspapers as saying at the recent annual shareholders meeting that “DBS has deep management bench strength”. Nobody at that shareholders meeting had the balls to stand up and ask him, “What bench strength are you talking about, Mr Koh? You just sacked 900 of your senior-most and best managers in January.” You consider Rajan Raju bench strength?

In another remark also captured by the local amanuensis, Mr Koh Boon Hwee was quoted as saying “there will be no change in strategy while Richard Stanley is away (on sick leave).” I was not there to know the context in which he said that. But after enquiring around, my first reaction was that nobody was asking him for that assurance in the first place. In fact, if anything, it is understandable that strategy is an evolving thing, especially in the midst of a global economic crisis when nobody knows what the next step should be. By the way, they were indeed changing strategy in respect to shoring up capital, which I am sure was the result of many discussions held without Richad Stanley in the room. So what was the purpose of the assurance?

The statement reminded me of a cat’s assurances to the little lizard in his paw that nothing was going to happen to him before doing what cats do to lizards in their paw.

Mr Koh Boon Hwee bears only half the blame for this intellectual charade. The quality of inquiry in this little “intelligent” island takes the other half. Here is a man who has been given the reins of the most important financial institution in the region, and he just tells us whatever he wants and we accepted them without question. We have no one else to blame.

When I think about the way in which Alan Greenspan has been able to get away by telling the world whatever gibberish he wanted (which was mostly unintelligible) during his tenure as Fed chairman, I think we have only ourselves to blame for giving him the leeway. Nobody put up their hand to ask, “I am sorry, Mr Chairman, I am stupid, but I do not understand what you mean by entrepreneurship in finance.” Nobody said, “I am sorry Mr Chairman, I am really stupid, I don’t understand why hedge funds, which leverage the financial services industry 40X, should not be regulated,” or “sorry Mr Chairman, I don’t understand why the Fed does not even see the reason to publish the size of the leverage and in what instruments.”

Ditto Mr Koh Boon Hwee: “I am sorry, I am really stupid Mr Koh Boon Hwee. We just accepted your statements as if Richard Stanley was coming back. We were silly not to press you on the topic of succession in DBS….. you are in the sweet spot of being seen as the solution to the problem.”

I heard rumours this week that the bank was speaking to Francis Rozario. Now, Francis was one of Temasek’s original choices of CEO of DBS. In my opinion, he would have made an excellent CEO, except that from pieces of information I can put together, I was told last year that “the DBS board rejected Temasek’s choice.” So, I took a look at the DBS board, and I almost fell off my chair to see how much it had changed since the days of Jackson Tai.

To his credit, Jack had pulled together what I would call a board that appealed to the aspirational values of DBS. In other words, his board was made up of giants in different industries who had built up global businesses, and whose insights and goodwill could help DBS grow to where they came from. People who would have had no time for DBS unless he had practically begged them to become board members. The DBS board today, in my view, is made up of fund management entrepreneurs and sales types who, net-net, have more to gain from being directors of DBS than to give to DBS. In my world – “wanna bes”.

So, I am guessing that now they may are talking to Francis Rozario because he is the nearest replacement in sight, unless of course they get Mike Denoma again, whom they previously rejected in favour of Richard.

(This Singaporean pre-occupation with throwing money at white men more than 50 years after the end of colonialism makes for an amusing side conversation. I feel sorry for my white friends who are actually good at their jobs, an integral part of our society, and should be considered for top jobs along with yellow, brown and black. In Singapore, he can’t be sure if he was hired because he is good or if he is a good dog.)

But if indeed Francis is appointed CEO, the clash with Mr Koh Boon Hwee will be immediate. One will have to go. Since I do not think that Mr Koh, having found that cushy spot from where he can direct everything, is going to allow that, the bank will probably say that they can do without a CEO until they find the next one.

In all of these movements, we are all forgetting the long journey that DBS has gone through in trying to become a bank of some substance since 1998. I would submit that it has now completely lost the leadership it had in its own home ground. BILLIONS AFTER BILLIONS AFTER BILLIONS OF DOLLARS WASTED ALREADY.

We have forgotten the billions of dollars of past mistakes: the POSB integration, the Dao Heng Bank goodwill write-off, Thai Danu Bank write-down, the Thai Military Bank fiasco, that Indian finance company that Rajan Raju messed up. The Bank of the Philippine Islands sitting on the shelf. That is why the current situation that the bank is in is completely untenable.

In our annual assessment for the various awards that we give to banks, we see data that suggests that DBS market share in a number of its core businesses is eroding very quickly. It’s ROA is falling, its market share especially in Hong Kong is falling. It’s really a business without a rudder.

I see in this tragedy that is DBS, the cushy, small minded, compliant microcosm that the Singaporean corporate scene has become today. This is NOT the country that is going to give rise to the global corporate giants of the future.

Despite the apparent sophistication in lifestyle, there is no sophistication in inquiry. A community that strains at gnats and swallow the camels dished at them wholesale. The wealth and egos are there for everyone to see, but not the clash of inquiring minds that makes for a truly world class corporate environment. A case of pearls and swine in picture perfect harmony. Is this society truly capable of generating world class institutions? How can it? At best, they are imported.

Objectively, I have no gripe with Mr Koh Boon Hwee personally. He is entitled to be anything he wants to be. My concern stems from DBS Bank finding itself in a position of being influenced by someone who, appointed as a non-executive chairman, engineeers his way to the most executives of roles without any experience.

If you take that journey that started in 1997 when the stated intention from the very top was to revamp Singapore’s financial services sector, the comings and goings of John Olds, Jackson Tai, Philippe Paillart and several sundry others, shaped the scene for better or for worse.

At the very least, you would expect there to be someone, anyone, up there in the Singapore system who keeps track of the evolution of this very expensive asset of the country and who connects the dots, so that we don’t keep building on mistake after mistake.

I am just saying that Mr Koh Boon Hwee, by virtue of his activist personality, his previous track record and the fact that he has no experience in the financial services industry raises alarm bells in me that tells me that he is not going to serve the future of this industry well.

I don’t like what I saw happening in the previous organisations where he was chairman, especially Singapore Airlines. I see some of the issues relating to the employees emanating from the implementation of his ideas at Singapore Airlines being replayed in DBS.

I also do not like what I see in the trail of his M&A bids for the various IT companies he was involved in as an entrepreneur. They tell me that here is one man who is very determined to find a platform for implementing his ideas of what a business should be, whether rightly or wrongly, and it is my opinion that the future of the financial services industry of Singapore is not the place for him to try them.

The fact that despite these concerns, he has been finding himself in a sweet spot handed to him through the turn of events, and by his own ingenuity makes me even more concerned.

For all the negative remarks that are being thrown at Ho Ching, the CEO of Temasek, at least I could see where her vision thing was coming from. Without saying a word, she was trying to figure out a way to build the financial services industry that could become a truly core pillar of Singapore’s economy, that could dwarf all the bells and whistles type of things, such as the casinoes and F1 rallies, that Singapore has to do these days to grow out of its current giant self.

Prior to the global economic crisis who would have known? Work towards building a truly large global financial institution by doing whatever was necessary (merge StanChart, DBS and ICICI?) that could make this tiny little island a giant financial hub that far outweighs the size of its organic economy? Now, today some would say that is dangerous – look at what happened to Switzerland. But it is a wholly unanswered question: the illness of UBS was because about 40% of its business was dabbling in financial markets, whilst a commercial banking business with no more than say 10% of its total assets in markets might have been pliable, like a giant telco company in different markets.

To be accurate, some of her core assumptions were indeed wrong. They could or should have benefited from her own access to a well debated body of knowledge. But “discussions” on Singaporean internet chat sites are often nothing more than a series of juvenile grunts.

Even in countries like China or India, the quality of discussion on the internet can be unbelievably refreshing, of high quality, productive and useful. All serious minded people can take some value out of such dialogues. What we find in Singapore are just snide, inane peripheral gossip on things like whether someone resigned before or after announcing the annual results.

In a material discussion, you can see the building of a shared knowledge base that a people can grow from, and you wished that th work put in the past seven years or so will not go in vain. Some of the challenges that Temasek faces today are exactly the same as DBS has faced in the past 10 years or so. What will be really funny is if 7-8 years down the road from today, nobody remembers what Temasek learnt from its past that can become a bulwark against future mistakes and future Koh Boon Hwees who can rewrite the DNA of an organisation, shaped as they are by expensive mistakes.

The point is not whether Ho Ching made mistakes that cost billions of dollars. Everyone made mistakes in this crisis, including Warren Buffet, for goodness sake. But I have not seen a single discussion on the assumptions that she was working on, how much of it can be salvaged so that we can build on what she has already achieved. For all its weaknesses, Temasek’s bench-strength is still as an investor in financial services more than any other industry. How can we build on that instead of taking on a different tack that is going to cost another many years, many more mistakes at billions of more dollars?

But Singapore is intellectually …. a limited… city state, where the comforts of ostensible wealth and a false sense of intellectual superiority have arrested its people – both the locals and the foreigners in it – into a dangerous smug sense of collective stupidity. When during the Lehman minibond scandal, the Monetary Authority of Singapore (MAS), caught completely flat-footed, barked at the banks to select someone, anyone, pay him and use him as an “independent” adjudicator of the complaints hurled at them by the screaming public, it struck nobody to say….wait a minute, how can someone selected and paid by the erring bank be called “independent” by any stretch of the imagination.

In the larger scheme of things, for all the unuseful things that have been said about Ho Ching, the one thing you should respect her for is that she knew when to give up. Nobody could have retired Ho Ching, except Ho Ching herself, and when she did that, she was saying without saying a word that “I will not kid these people, I will treat them with respect.” The same people then comment snidely on mistakes already made, completely miss the point about what she is really all about and can’t carry the dicussion forward to build on the future. That is what I mean by a small minded people.

Any number of other people in leadership positions, not just in Singapore but in any number of countries, would have hung on to their positions because they would not know what else to do.

Sure, there is always the threat of that “invisible hand” serving no better purpose than to remind us that intellectual inquiry in Singapore is a high price to pay for those of us who care enough. But the lack of inquiry, the lack of building of a collective body of knowledge is the much higher price to pay, that forfeits us from exactly the destination that this country wants to go.

It is this lack of inquiry that has put someone like Mr Koh Boon Hwee in his sweet spot today. Our only protection against that is to be stupid, really stupid and ask, “what were you saying again?”

——————————
A note to interested readers: Could you do me a favour and link with me through LinkedIn, Facebook or Twitter. Whichever you prefer. The links are on this site in a page called “Subscribe to me”. It links you to “The Banking Conversation”, and not to me directly, but it is the one consolidated site from where I want to keep you informed of my postings and other thoughts as I travel. I hope you will find the link useful. Thank you. ED