Submitted To :

Dr Salman Masood Sheikh

Submitted By :
Azhar Rasool Qamar
Waleed Farid
Programe :
MBA 1.5
Assignment :
Corporate Governance
Slow Train Coming: Train Disruptions at SMRT

Question No # 1

Evaluate the events leading up to the train breakdowns. Did SMRT place too much emphasis on
shareholders’ interests compared to the interests of other stakeholders, especially
commuters?

Answer

Different viewpoints exist between the stakeholders and shareholders. Stakeholders are more
concerned on the quality of service a corporation brings while the shareholders focus on how
they can increase the value of the business and use its resources in increasing the corporations’
profits. In the case of SMRT, placing much emphasis on shareholders’ interests over those of
other stakeholders is hinted at – overcrowding of trains which led to commuters’ dissatisfaction,
improving profitability by applying for maximum fare adjustment, and growing public
unhappiness due to unnoticeable service improvements. Corporate governance and company’s
responsibility to other stakeholders are strong complements to each other and must be hand in
hand but SMRT has focused more on the former and failed to deliver a better quality of service
to the commuters.

Question No # 2

Evaluate the effectiveness of the risk management and crisis management procedures in place at
SMRT. Have the Board Risk Committee and Risk Management Committee executed
their duties effectively?

Answer

Communication is one of the most vital parts of managing risk and controlling difficult
situations. The Board Risk Committee and the Risk Management Committee lacked this
essential element when things have gone unruly. SMRT only apologized to the inconvenienced
commuters without giving instructions on what to do or explaining what the situation is. Solely
apologizing for what could have been prevented shows the ineffectiveness of the committees in
relation to their duties. They could have eased the situation the commuters were in. Instead of
apologizing, they should have communicated to the commuters the instructions or safety
procedures as a remedy for their lack of preventive measures, or at the very least, explain what
the situation the commuters are in so that they could have assessed their situation. The
incompetence of the committees shows that they were ineffective in performing their duties.

Question No # 3

Should the Board of Directors be held responsible for the train disruptions?

Answer

Yes, the Board of Directors should be held responsible for the train disruption. They weren't
ready because they lack proper quality management. They said that it never happened before so
they weren't really expecting that the disruption would happen but they should have foreseen that
this kind of problem can be encountered and should have always prepared for this kind of
problem. Also, another factor is the constant changing of the members of the Board to bring in
new skills. They might have encountered inconsistencies in decision making and quality control
in managing the trains. Even though they were commended on their corporate governance having
a good structure of Board of Directors, it doesn't mean that they wouldn't be encountering any
major problem.

Question No # 4

There were a number of resignations of senior management staff over a very short period of time
prior to the train disruptions. What might be potential explanations for the high number
of resignations and what impact might they have on SMRT? Should the board monitor
the turnover of senior management and staff and should they have been concerned with
the high turnover?

Answer

High turnover can be an indication that something is wrong within the organization or how the
organization was being led. In the case of SMRT, resignations were prevalent from top
management positions and, if ignored, can have a direct impact on the entire company by
depleting organizational skills, in addition to the costs incurred due to high turnover. The board
could have made and should have made efforts in preventing high turnover maybe by improving
communication, recognizing a job well done, or giving trainings. Every business runs and
achieves success through its people and this will not be realized if the employees, most
especially the management, are not engaged and operating at peak efficiency and continue to
leave the company.

Question No # 5

SMRT appointed their independent director, Mr. Tan Ek KIA, as their interim CEO. What does
this suggest about SMRT’s CEO succession planning?
Answer

Having an interim CEO is an indicator that a company is facing a corporate governance crisis.
The previous CEO, Saw Phaik Hwa, reportedly announced that she will not step down and try to
solve the problems of SMRT. However, due to the public outrage, she has decided to withdraw
from the position. Based on the SMRT case, it is evident that the Board has no succession plan in
place. Appointing a new permanent CEO may be hard since the key employees and directors left
the company. The Board has only eight members after the departure of the previous CEO and the
two non-executive directors. Since the Board has not prepared or trained potential successors, an
extensive search and selection process is needed in order to appoint a new CEO that will help
rebuild and take the SMRT to the new level.