Facing the Sack

That would never happen in Asia.

This was my first thought as I read about the sacking of top executives for their banks' massive credit losses. Firing your head honchos in the full glare of the public is in stark contrast to the quiet easing of duties from Asian companies.

Over the past week, investment banks are undertaking a spring-cleaning of sorts in a run-up to their results. From Bear Stearns goes Warren Spector, its former co-president. From UBS, its former chief executive Peter Wuffli and former investment banking chief Huw Jenkins. And the latest from Merrill Lynch, its global head of fixed income Osman Semerci and his deputy Dale Lattanzio - all taking responsibility for the billions lost in the credit meltdown.

For the banks, it is a way to show investors they are serious about getting their house in order. That they are eliminating the bad weeds that had mired them in losses. That there would be a new start, and this is the new management.

In Asia however, it is pretty hard to get fired.

Of course, top executives do leave the company when bad investments or big losses happen. But I've noticed their departure statements are often couched in benign language, not intended to offend. They leave for "personal reasons", "to spend more time with family" or as part of a "job rotation" - but it is somewhat suspicious to do so after a patch of bad results.

The most interesting recent movement is a classic example.

Two weeks ago, Temasek Holdings' chief investment officer Jimmy Phoon resigned to "take an advisory position at a local investment firm." Why he would leave one of the largest investment funds in the region for a local player is interesting. But Mr Phoon's departure also comes on the back of a S$830 million impairment loss for the Singapore fund's full year results as well as a likely $150 million pounds loss on its investment in Barclays. He was Temasek's third investment chief in less than a year.

In his final interview on Sept 29 with Newsweek, he defended Temasek's troublesome investment in Thailand's Shin Corp to the last. From his words, it is as if the huge impairment losses and seismic political fallout were to be blamed on external problems, not any degree of human oversight.

Does Temasek accept any blame whatsoever for contributing to the fall of Thailand’s government?
Of course not!

What lessons have you learned from this experience?
We have invested in many different industries in many countries. We have to accept there will be changes in the [business] environment, the economy and the markets. That’s part and parcel of being a long-term investor.

I admit, I may be reading too much into these non-confrontational statements. Why over-analyse the motives of the guy who might really miss his family or want a career change? But I suppose what the outsider investor/observer/commentator would appreciate is some acknowlegement of misjudgement, admission of fallibility, maybe an apology, after all the hullaballoo. It's some form of closure.

To satisfy this thirst for more transparency, the Singapore and Hong Kong stock exchanges ruled this year that company directors and top executives who quit cannot just cite they are leaving for "personal reasons" without elaborating.

Companies in Asia who fear this change can take heart though. Share prices of the investment banks rose after they announced the executive purges and the heavy losses. Apparently, shareholders like the fact that the company laid bare its skeletons. Of course, the same thing cannot be said for those who had to leave this way.