Lim How Teck: Profit is not a dirty word

THE LONG INTERVIEW, LIM HOW TECK

Mr Lim How Teck, who sits on 14 boards, tells Susan Long he is on a battle against the corporate culture of timidity and conservatism here.

The Straits Times, 8 Jun 2012

MR LIM How Teck is that rare breed of corporate samurai who lives and dies by the sword.

He puts his job on the line to prove a point. He volunteers for suicidal-sounding tasks, when others dive for cover.

The chairman of Certis Cisco Security, ARA-CWT Trust Management (Cache) and Heliconia Capital Management has a few well-thumbed books - including Sun Tzu's Art Of War and Miyamoto Musashi's The Book Of Five Rings - which become study materials during his board retreats.

'If you, as a warrior, are frightened to die, you cannot fight a good fight. You must be prepared to die,' he declares, adding that one should not plan for retreats or escapes.

His experience is: 'If you dare to walk the talk and put your money where your mouth is, you can convince a lot of people.'

Whenever challenged at work, he cuts off the argument with: 'If I'm wrong, cut my salary by half. If I'm right, pay me extra by half.' Or he offers to sign an undated letter of resignation and adds: 'If you're not happy later, put the date in and I'm gone.'

Most of the time, he says, his past bosses have blinked first and said 'the bet is on' or 'You seem so confident, let's see what happens at the end of the year'.

Today, the 62-year-old who sits on the boards of 14 companies here - five public and nine private - says he battles an entrenched corporate culture of timidity here and overly modest earnings projections daily.

He sees his role in these companies as 'releasing their acupoints so that they have a greater flow of seamless energy to take them to greater profits'. His fellow directors say he brings to the table a clear-eyed, singular focus on how to make and save money - and more and more of it.

Indeed, he expounds the belief that in motivating employees, fear is a more effective weapon than love to instil 'absolute obedience'. But love, he concedes, incites 'superior individual performance'. His solution: Use both interchangeably, which is what he does at Tuas Power.

When he first became chairman at the power generation company in 2005, its profits had flatlined at about $100 million for five years. 'It was on autopilot. So I said, 'Look, you guys are capable of more. You're hugging the coastline. I'm going to take you to the open sea, you will have good catch but also severe weather. Are you game for big game fishing?''

No one was, of course. So he warned that if the company turned in the same profit next year, he would cut the employee bonus by half and heads would roll. But if they raised the profits by 50 per cent, he would double their bonus.

At the end of the year, they met his target and he delivered. But when planning the next year's budget, they reverted to their cautious old projections.

He railed: 'Guys, you did it, it's a historical fact, not a figment of your imagination... You have to burn the bridge behind you and go forward.' Then he chucked their budget into the bin and demanded a new one.

Again, they surpassed the past year's record profits by another 30 per cent, by maintaining the most efficient steam plant in Singaporeand astute hedging of oil prices, and received an exponentially larger bonus.

'Suddenly, for the first time, when they collected their bonus, they could go out and buy a new Mercedes,' he relates. Having opened their eyes, he went on to teach them how to enjoy life and Michelin-star dining, so they would 'want to earn even more'.

If he sounds like Gordon ('Greed is good') Gekko from the Wall Street movie, he is unrepentant.

'Life is not meaningful when people don't have ambition to eat well, live well, play well. If they don't need a lot of money, they don't aspire to earn a lot of money... It's important to open the minds of people, otherwise they are too conservative.'

Six years on, Tuas Power's profits have quadrupled, says Mr Lim, who became deputy chairman after it was sold to China's Huaneng Group in 2008.

Tuas Power's chief executive Lim Kong Puay, 56, says that was thanks to the former 'setting daunting targets, stretching the management to perform better and to grow new strategic business beyond the core power generation business model'.

Hunting and farming

MR LIM How Teck learnt how to make everyone happy as the eldest of eight children of a sewing machine salesman and housewife mother.

From age eight, whenever his mother was busy, he went to the market, bought a pomfret, then fried it. He would cut it into eight parts - such as the head, tail, stomach, fillet - place them into little covered saucers, then ask his younger siblings to choose one each. 'So if they get the wrong part, sorry, it's their luck. It's not because I'm unfair. I don't play favouritism,' he relates.

He 'never wanted to be looked down upon' and was the only one among his siblings to make it to the then Singapore University. He read accountancy - the 'shortest professional degree' - using his national service earnings to fund his studies.

In 1975, he joined Coopers & Lybrand briefly as an auditor, then British trading firm Plessey - but left both because the pay crept up too slowly. To support his family, he taught at three private schools at night.

During busy seasons, he worked from 9am to 6pm in the office, taught from 7.30pm to 9.30pm, dashed back to the office to finish his work, dozed off on four chairs placed in a row, then washed his face and resumed work the next day.

That was how he climbed container shipping giant NOL Group's ranks after joining in 1979 as a senior accountant. Seven years later, he was named group chief financial officer (CFO) by age 36, managing 600 people globally.

The volatile business of shipping, which requires juggling shape-shifting geopolitics, oil prices and trade trends, taught him how to be a 'hunter' and 'farmer'. He learnt the split-second art of pulling the trigger of fast decisions, as well as how to read the changeable weather.

It led him to broker NOL's takeover of the nearly 150-year-old shipper APL in 1997 - the biggest purchase by a Singapore company at US$825 million in 1997.

'When we made the purchase, we were ranked No. 17 in the world. Buying APL made us No. 5 in the world overnight and gave us a certain scale.

'It was simple - if we didn't buy, five years later, from No. 17, we would be marginalised to No.18, No. 19, and eventually have to exit the business. This is what has happened to MISC Bhd, which is exiting the liner business. So you got to believe in it. If you don't believe, you won't make such a big decision.'

Alas, shortly after, the deal ran smack into the Asian financial crisis. And during the 'foreign talent' wave, the shareholders recruited Dane Flemming Jacobs in 1999 to run the show.

As heads started rolling, Mr Lim, then deputy CEO and CFO, knew his would be next. So when the newly installed CEO Jacobs asked for US$100 million improvement to the bottom line and everyone looked down, he piped up: 'I'll give it a try, Sir.'

He succeeded, asked for a five-year contract and got it. When Mr Jacobs was asked to leave in 2003 amid bleeding losses, Mr Lim ran NOL for half a year together with the board, returning it to profitability.

He is candid about the next part - why he retired early from NOL in 2005 at age 55. He could not - as he put it - 'see eye-to-eye' with former minister David Lim, who was NOL's CEO and president until his sudden departure in 2006.

True independence

ALL this has shaped Mr Lim How Teck's conviction today that corporate governance is really about governing the CEO. 'Everybody has a boss, except the CEO. Who's his boss? It's the board of directors,' he says.

Asked what he thinks of the new Code of Corporate Governance, which sets out stricter criteria on independent directors, he says: 'Like it or not, the independent director gets voted in by the majority shareholders. Will they choose the independent guy who will keep on shooting at them? He will not be around to shoot for long. The next AGM (annual general meeting), he will be gone.'

The truly independent guy, he posits, is one who is financially independent, though that is tricky to measure. Another yardstick he proposes: Having actually quit a big company for good reason. 'Those who've never resigned from a board in their whole life, what's so independent about them? Unless they tell me that they always agree with the management all the time,' he says.

Of course, one should not resign because of disagreement with management over 'one single item', he says. 'It should be a systemic thing over their philosophy towards governance. If so, you'd better get out of there fast. As a director, you've a lot of responsibility and fiduciary duties.'

He learnt this the hard way.

In 2006, he earned the unfortunate distinction of being one of the shortest-serving directors when he was voted out by dissenting minority shareholders of listed human resource technology firm Integra2000, two weeks into the job.

'It taught me a lesson because I was a hired gun persuaded by an old friend to go and chair the meeting,' he recounts. But he says he had asked for his fee in advance and ended up mediating the dispute for a further sum.

Today, he has got the art of juggling 14 boards down to a science and estimates he spends about 70 days tending to them. That leaves him with 295 days of the year for other pursuits.

He explains: 'A good company usually has at most only five meetings a year - four quarterly meetings and sometimes one corporate retreat meeting. That's about all. So that's about five days times 14 (boards) = 70.

'If the company is good, they don't want to see you too often. When the company is lousy and they get into trouble, five times a year is not enough, they may need 20 times. So it's a virtuous circle or vicious circle. You get the right company, less risk, pays well, less time.'

To make sure the companies don't all require his attention at the same time, he says it helps to sit on a mix of public and private company boards with different reporting seasons, financial years, domiciles and time zones.

But are 14 directorships too many to handle, even with the best planning? Former Singapore Exchange chairman J.Y. Pillay previously said that a director should sit on no more than five diverse, large company boards.

Mr Lim says it is not the absolute number of companies that matters but how big they are.

He suggests a point system: Listed companies with more than $10 billion turnover should be given three points. Those earning $1 billion to $10 billion get two points, and those earning less than $1 billion get one point. Unlisted companies do not count.

'So instead of saying five companies maximum, which is a very blunt instrument, I would say maybe the limit for one person should be a total of seven or eight points.

'Right now, an SME (small and medium-sized enterprise) is treated as the equivalent of Singapore Airlines. But being the chairman of an SME and chairman of SIA are very different roles and responsibilities, with fees that are miles apart,' he says, adding that using his proposed measure, he is now at five points.

'The chairman of OCBC, Dr Cheong Choong Kong, gets paid about $3 million. For an SME, the fees are $50,000 to $80,000. How many more boards does the chairman of an SME have to sit on to be equivalent to the chairman of OCBC? So how can we say they're equal? They're far from equal.'

Retiring to riches

TODAY, he says his friends laud his 'model to retirement', and how he managed to secure 'an improved standard of living' along with independence and more free time.

'If you retire at 55, you have a better chance to stay alive longer because you can afford to slow the tempo. People want you to sit on the board for your wisdom, not because you can run very fast and very hard.

'We're getting old, we have to use our grey matter more, use our legs less. If you want to be fast, sit in your sports car,' he says.

He owns a Maserati with chilli-red seats, as well as a Jaguar XJ Supersport, which he takes for spins in Malaysia.

Besides mahjong and card games, he also enjoys cooking his signature Teochew braised duck and cuttlefish and white radish soup for his wife of 35 years, Rosalind, a retired bank officer, their 30-year-old son who is a senior treasury manager in a commodity firm, and 24-year-old daughter, who runs branding company Sensaura.

He is also looking into doing more pro bono consulting work, which takes up 10 per cent of his time. He sits on the board of The Foundation for Development Cooperation, which does research on micro-finance in the Asia-Pacific region, and Papua New Guinea Sustainable Development Programme, which creates sustainable development projects.

He is paid a fee for the latter and applies the same commercial rigour to it, making sure there is positive cash flow and co-funding.

Is he completely unapologetic about his pursuit of profit?

'Absolutely. What's there to apologise for? You just have to make sure that after you make your money, you don't forget the poor guy. Profit is not a dirty word unless you're making it all from the poor guy. Now after having made it, it's about how you can give the poor guy a leg up.'

He admires American investor Warren Buffett for remaining an 'unassuming chap' despite his wealth, for not leaving it all to his children, as well as for volunteering to pay more taxes (because it's not fair that his secretary pays a higher tax rate).

You wonder if you misheard. Could he possibly be offering to pay more taxes?

'No, I never said that,' he rejoins, then adds with a guffaw: 'If I'm as rich as him, yes, but until such time, no.'

His views on...

SCHOLARSHIP HOLDERS AND VETERANS

Most important of all - do you have confidence? That is what separates scholars from veterans. The scholar is very good at calculating and analysing scenarios but not so good when it's foggy ahead. When they are lost, they're frozen, dare not buy, dare not sell, dare not move, in case they knock into something. Staying stationary seems to be best if you cannot see very well... But if a typhoon is coming, it's safer to be out at sea than in the harbour. If you are on shore, you may end up on somebody's roof.

THREATS OF LAWSUITS FROM SHAREHOLDERS

I say: 'Welcome. I need a bit of excitement in my life. But before you do that, let me remind you I've got D&O (Directors and Officers Liability Insurance) of $20 million to defend myself. Get your money ready. See you in court.' It never happens. They all run away. That's why I tell people the D&O is not to cover you for negligence. It's to defend your innocence.