Kwek Leng Beng moves to sack son and CDL CEO Sherman Kwek; files lawsuit over ‘attempted coup’
CDL says Sherman remains ‘group CEO until... there is a board resolution to change company leadership’
A BATTLE for control has erupted within property giant City Developments Ltd (CDL) , pitting father and son against each other in the Kwek-family controlled company and exposing underlying tensions that have been brewing for some years.
In a dramatic four-page statement issued to media on Wednesday (Feb 26) morning, executive chairman Kwek Leng Beng said that he had filed court papers on Tuesday to deal with the “attempted coup” – by group chief executive officer and his son Sherman Kwek, Philip Lee, Wong Ai Ai and a group of directors acting with them – to allegedly consolidate control of the board and the group.
Lee is the lead independent director of the board, while Wong is an independent non-executive director.
The action taken was “to set things right” and to “restore corporate integrity”, said Kwek Leng Beng, 84.
In a late-night turn of events, the elder Kwek issued a statement at 11.34 pm saying that “following a court hearing today, the serious lapses of corporate governance at CDL (together with its subsidiaries) have now been halted”.
“The two new directors, irregularly and hastily appointed on Feb 7, by means of Directors’ Resolutions in Writing, have undertaken not to exercise any powers as directors until further notice of the court.”
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The statement added: “Sherman Kwek, Philip Lee, Wong Ai Ai and the remaining directors acting in concert with them, have undertaken not to take any further actions regarding their attempted changes to the board committees and management of certain CDL’s subsidiaries, until further notice of court. In addition, the irregularly constituted Nominating and Remuneration Committee has been suspended from taking further actions.”
Earlier in the day, Kwek Leng Beng said: “We intend to change the CEO at the appropriate time. We will continue to explore all legal options available to us to vigorously defend and protect the interests of CDL and its shareholders.”
According to the elder Kwek, Sherman Kwek’s group had orchestrated major board changes and bypassed the nomination committee (NC), contrary to corporate governance principles and the Singapore Exchange’s listing rules.
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Crossing a “red line”
The senior Kwek said: “As a father, firing my son was certainly not an easy decision. I accept that business decisions are difficult and young people may make business mistakes in their careers and that is understandable, but circumventing corporate governance laws is a red line.
“The stakes are simply too high to allow reckless power grabs to destabilise the company.”
Kwek Leng Beng, CDL executive chairman
“As chairman, my responsibility is to CDL, its shareholders and its future. I take my role as executive chairman seriously and have always prioritised the interests of all shareholders, not just those of my family. The stakes are simply too high to allow reckless power grabs to destabilise the company.”
In response, Sherman Kwek, 49, issued a statement in the afternoon saying: “It is incredibly disappointing that our chairman and a minority of the CDL board have decided to take these extreme actions regarding this disagreement around the size and make-up of the CDL board.”
“It is incredibly disappointing that our chairman and a minority of the CDL board have decided to take these extreme actions regarding this disagreement around the size and make-up of the CDL board.”
Sherman Kwek, CDL CEO
The statement was issued “on behalf of the majority of the CDL board of directors”, and said that recent changes to the board have “never been about ousting our esteemed chairman”.
In his statement, Kwek Leng Beng said: “(Sherman’s) role in circumventing good governance and consolidating power through the irregular appointment of two new directors was the latest of a long series of missteps.”
He noted that this was not the first time that Sherman Kwek’s decisions “have put CDL in a precarious position”.
He cited:
- The group’s investment in China developer Sincere Property Group that led to a S$1.9 billion loss for CDL in the 2020 financial year;
- Poor investment decisions in the UK property market that resulted in significant financial losses and contributed to a 94 per cent decline in profit for the first half of 2023
- The consistent underperformance of CDL’s share price compared with its peers since Sherman Kwek assumed leadership in 2018. This reflects “eroded investor confidence and shareholder concerns over strategic missteps”.
The e-mailed statements followed the sudden cancellation of the company’s FY2024 results briefing on the morning of Feb 26 after CDL called for a trading halt.
CDL said in the afternoon that “business operations remain fully functional and unaffected”. It added that Sherman Kwek remains the “group CEO until such time as there is a board resolution to change company leadership”.
Earlier tensions
A surprise departure following CDL’s China investments was an early hint of a rift in the company’s management.
In October 2020, one of Kwek Leng Beng’s cousins, Kwek Leng Peck, abruptly quit the CDL board where he had been a non-executive and non-independent director for more than 30 years.
Kwek Leng Peck cited disagreements with the board and management over CDL’s investment in Sincere Property Group, as well as its continuing provision of financial support to the Chinese property group.
He also had reservations over CDL’s approach in managing its wholly owned unit, Millennium & Copthorne Hotels, which he concurrently resigned from as a director.
Following this, two other independent non-executive directors stepped down in late December 2020.
Koh Thiam Hock exited the board having shared his observations, concerns and suggestions on the group’s investment in Sincere, CDL said. When Tan Yee Peng stepped down, the company at the time noted that Tan “disagreed with the board and management about the handling of the (Sincere) investment after the acquisition”.
CDL appointed new directors: Daniel Desbaillets and Chong Yoon Chou in November 2020, Carol Fong in late December 2020 and Lee in January 2021.
Lead independent director Jenny Lim stepped down in May 2021. CDL said at the time that she believed it was “appropriate for her to step down in the light of contributions from the board’s new independent directors”, as she had fulfilled the responsibilities in her various roles during her tenure as an independent director.
Nominations of Jennifer Duong Young and Wong Su Yen proposed over CNY
In his statement on Wednesday, Kwek Leng Beng detailed a series of events orchestrating the acquisition of board control.
He said that on Jan 28, the eve of Chinese New Year, CDL’s corporate secretary sent an e-mail to the board with Lee and Wong Ai Ai nominating two additional independent directors.
On the following day, he questioned the urgency of appointing two new directors without due diligence and proper vetting.
“Chong Yoon Chou, our NC chairman, was completely unaware of the nominations. He strongly objected to bypassing the pre-scheduled NC meeting on Feb 20.”
Lee had cited “urgent concerns” as justification for the rushed appointments, but failed to provide specifics, said Kwek Leng Beng.
He immediately ordered the cancellation of all director interviews, “reinforcing the need for transparency and adherence to corporate governance norms”.
However, on Jan 31, Lee requisitioned a board meeting, attempting to push through the proposed appointments.
On Feb 5, CDL’s board received legal advice that bypassing the NC was against the Code of Corporate Governance.
Two days later, on Feb 7, a board meeting was held with no vote being taken. A Directors’ Resolution in Writing for the appointment of the two new directors was also circulated and approved within hours, bypassing the typical NC process.
“This confirmed that Sherman Kwek, Philip Lee, Wong Ai Ai and the other directors acting with them had pre-planned this move,” chairman Kwek said.
On the same day, CDL issued a statement via the stock exchange that it had appointed Jennifer Duong Young and Wong Su Yen as independent non-executive directors of the company.
He added that he was “left with no choice” but to send an e-mail the following day seeking Sherman Kwek’s dismissal from the position of group CEO. However, on Feb 9, the reconstituted board led by Lee, objected to his attempt to dismiss Sherman Kwek.
Dismantling the existing NC and replacing it with a nominating and remuneration committee is “a calculated effort to sideline independent oversight and give the majority bloc unrestricted control over CDL’s leadership and decision-making”.
The changes made by “Sherman Kwek’s group” had enabled the appointment and removal of board members arbitrarily, and stripped the chairman of “meaningful authority”, he said.
Kwek Leng Beng added that certain members of the board, including Philip Yeo and himself, remained firmly committed to upholding the highest standards of governance and accountability.
In proposing to remove Sherman Kwek as CEO, they named group chief operating officer Kwek Eik Sheng, who is Kwek Leng Beng’s nephew, to serve as the interim CEO. The group will search for a professional CEO, the elder Kwek said.
He added: “We will reinforce and strengthen CDL’s governance framework to prevent future violations and ensure that no single group can override corporate governance safeguards.”
In 1971, Kwek Leng Beng, his brother Kwek Leng Joo and their father Kwek Hong Png acquired control of a loss-making CDL.
Under Kwek Leng Beng’s leadership, CDL expanded its real estate portfolio and grew to become one of Singapore’s leading property players.
Shares of CDL ended 0.4 per cent or S$0.02 lower at S$5.12 on Tuesday.
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