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AGM WATCH

Keppel tightens internal controls to stamp out corrupt behaviour

Chairman reiterates regret and disappointment; says stringent due diligence for agents is in place

Singapore

KEPPEL Corporation has strengthened its internal compliance and controls as part of its resolve to stamp out any repeat of corrupt behaviour that implicated its offshore and marine (O&M) unit and its operations in Brazil, its chairman said in response to shareholders' concerns at the group's annual general meeting (AGM).

At Friday's AGM, a shareholder called on Keppel's board of directors to "give a sincere apology" to those adversely affected after news broke on what transpired in Brazil.

Last December, Keppel disclosed a global resolution calling for US$422 million in fines to be paid to the authorities in Brazil, the US and Singapore as settlement in relation to corrupt payments made by its O&M unit.

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The shareholder argued that since Keppel O&M is part of Keppel Corp, the board of directors for the listed group should apologise.

Responding to the shareholder's call, Keppel Corp chairman Lee Boon Yang reiterated the "regret" and "disappointment" in the actions of the now former employees linked to the corrupt payments. He added that such conduct is "avoidable and we will avoid it".

Dr Lee said that the group has moved to conduct "more stringent due diligence on any agents" for its businesses. This took into account that the corrupt payments made in Brazil, "people were able to hide these payments under agent fees (that) formed part of the contract sums". Consequently, these payments did not stand out as "specific items for particular scrutiny".

Keppel Corp also stated in its FY17 annual report that it has "implemented a new agent fees policy setting forth limits, guidelines and authority for review and approval of agent fees, including specific parameters to be applied when engaging the services of an agent". This is among a series of enhancements Keppel has made to its compliance programme since 2015.

On Friday, shareholders also queried the basis for an increase in the annual remuneration of CEO Loh Chin Hua, which one of them pointed out has outstripped the expansion in FY17 net profit. Mr Loh's annual remuneration rose 12.1 per cent to S$6.68 million, up from S$5.95 million for FY16. But net profit excluding the one-off penalty linked to the Brazil graft probe was S$836 million for FY17, or 6.6 per cent higher compared to S$784 million for FY16.

Board member and chairman of the remuneration committee Till Vestring explained that the increase in CEO remuneration in FY17 was the first in three years. For both FY15 and FY16, CEO remuneration "went down" along with lower net profits. But Keppel Corp saw its bottom line improve in FY17 after excluding the lumpy one-off penalty.

Mr Vestring added that Keppel Corp's share price performance had been considered when deciding the FY17 CEO remuneration. In FY17, Keppel's share price made notable advances, especially in the fourth quarter, shrugging off a momentary dip following news about the massive fines.

About 630 shareholders and proxies attended the AGM, which lasted about two hours. The group won majority votes in favour of its tabled resolutions, including approval of fees to non-executive directors.

The stock closed at S$8.21 on Friday, up 14 Singapore cents.

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