SGX queries Grand Banks Yachts’ controversial director

Mr Robert William Livingston II still holds directorship despite majority vote against his re-election, and SGX is concerned.

According to Grand Banks Yachts’ announcement on SGX, the basis as to why Mr Robert William Livingston II’s continued directorship until the Company’s next annual general meeting is appropriate, given that majority of shareholders voted against his re-election on 12 October 2011.

The Board did seriously consider leaving all the directors that did not get re-elected to the Board at the AGM off the Board and not re-appoint any of them. The views expressed bythe shareholders at the AGM were amongst the factors taken into account. Strong views were in fact exchanged on this issue and deliberations were extensive and lengthy, with legal advice taken. Upper most in their minds was their over-riding duty to act in the best interests of the Company.

Given the difficult industry outlook (which was highlighted at the AGM presentation, with the slides available for reference on SGXNET), the fact that the Company could be placed on the SGX Watch-list under Rule 1311 of the SGX-ST Listing Manual and as the Company will likely incur operating losses for the financial year ending 30 June 2012 (as stated in the Company’s results announcement for the year ended 30 June 2011), Mr. Jeffrey Stewart Bland and Mr. Peter Kevin Poli (being the two directors remaining on the Board immediately after the AGM) decided that the Company urgently needed experienced hands on deck to assist the Company to deal with the many difficult issues facing it and to provide the necessary expertise to bring the Company forward.

There was no time for delay as the next scheduled Board meeting to approve the First Quarter’s results for the financial year ending 30 June 2012 was in less than a month’s time and it would be remiss of the Board to function with only 2 directors and without proper Board committees for a period of time. It would also be unwise to rush to appoint untested directors who are unfamiliar with the business at this critical juncture and there clearly was
not enough time to convene another extraordinary general meeting to endorse potential appointments before bringing them aboard as that process would have taken many weeks.

The Board also believed that, from a corporate governance perspective, it was beneficial to the Company for the Chief Executive Officer to be a Board member, as he would owe fiduciary duties to the Company and be held accountable to it. Although it is technically possible for the Chief Executive Officer not to be a Board member, it would be incongruous from the management perspective for Mr. Robert William Livingston II (being the President,
Executive Director and Chief Executive Officer of the Company immediately before the AGM, as well as a member of its Strategic Vision Committee) not to be appointed to (and yet having to report to) the Board when Mr. Peter Kevin Poli (being the Chief Financial Officer) is appointed to the Board.

Moreover, Rule 210(5) of the SGX-ST Listing Manual requires the directors and executive officers of the Company to have appropriate experience and expertise to manage the group’s business. Since joining the Group in 2001, Mr. Robert William Livingston II has been intricately involved in the management and operations of the Company. For the four years prior to the worldwide economic downturn and recession commencing in late 2008, Mr. Robert William Livingston II, as President of the Company, actually led the Company’s sales team to the highest revenues recorded in the history of the Company. Through the past three years of the general economic downturn, he worked closely with his management team to keep the Company in relatively robust financial condition as compared with other
peers in the industry, with a healthy cash balance, no debt and continued outstanding brand equity.

It is important to note that at the AGM, notwithstanding his non-election to the Board, Mr. Robert William Livingston II did not cease to be (and continued to act as) President and Chief Executive Officer of the Company. With the challenges facing the Company, the Board viewed that it was vital to provide assurance to customers, dealers and employees that there is continuity in leadership and management and that the Company continues to have a firm, experienced hand at the wheel. This is necessary to prevent a loss of confidence in the business and avoid disruptions to operations. 

For these reasons, the Board is of the opinion that, acting in the best interests of the Company, Mr. Robert William Livingston II’s re-appointment to the Board is appropriate. However, the Board would like to clarify that Mr. Robert William Livingston II has indicated to the Board that he regards his re-appointment to the Board to be on an interim basis, pending the finalisation of the reconstitution of the Board. Once the new Board members are appointed, it will be open to the reconstituted Board to deliberate and determine if it would then be appropriate for Mr. Robert William Livingston II’s tenure as director to be extended and if he should continue on the Board until the Company’s next annual general meeting.