A 2017 photo of City Developments Limited executive chairman Kwek Leng Beng (left) and his son Sherman Kwek, who was then deputy CEO. - Bloomberg
SINGAPORE: Trusted family friends and senior establishment figures in Singapore intervened and mediated a truce which put a halt to an acrimonious boardroom fight between billionaire Kwek Leng Beng and his son Sherman Kwek, according to sources who spoke to The Straits Times.
The halt came after more than two weeks of tit-for-tat media statements by both men, during which the share price of their real estate company City Developments Limited (CDL) reached a 16-year low.
The Straits Times understands that the senior figures are neutral parties who have kept in contact with the senior Kwek, who is the executive chairman of CDL, and his son, CDL’s group chief executive.
The mediation took place in earnest after Kwek Leng Beng announced on March 4 the resignation of Dr Catherine Wu as “an unpaid independent adviser” to the board of CDL’s hotel arm, Millennium & Copthorne Hotels (M&C).
Sherman Kwek had said Wu was the reason for the dispute between the father and son. He accused her of meddling in matters well beyond her scope, adding that she wields and exercises enormous influence.
Due to her long relationship with the chairman, efforts that were made to manage the situation were done sensitively, but to no avail, Sherman Kwek said.
On March 12, the saga came to an abrupt halt as quickly as it had erupted, after the senior Kwek said he had decided to drop the lawsuit he had filed in February to stop his son and majority directors of CDL from implementing a number of board resolutions.
Kwek Leng Beng will continue in his role as CDL’s executive chairman, and Sherman Kwek will continue as its group CEO. All the current directors, including the two new independent directors - Jennifer Duong Young and Wong Su-Yen - will remain on the CDL board.
The older Kwek said all the board members have agreed to put aside their differences for the greater good of CDL and its stakeholders, and will continue to focus on strengthening CDL’s business.
The news was taken positively by the stock market.
In February, the senior Kwek had filed court papers to stop his son and majority directors of CDL from implementing a number of board resolutions which he alleged undermined his authority and were an attempted power grab.
The lawsuit was also filed to restrain the two newly appointed independent directors from exercising their powers, as the older Kwek said their appointment did not have full board approval and had bypassed the nomination committee.
He also sought to remove his son as CEO, and proposed that his nephew Kwek Eik Sheng, CDL’s group chief operating officer, serve as interim CEO.
Sherman Kwek denied that he tried to oust his father.
He accused the older Kwek of being influenced by Wu, whose conduct raises “a very serious issue of corporate governance”.
Sources who worked at M&C told ST that Wu sat in for most senior management meetings for the hotel arm, “even when chairman was not around”.
Most operational matters were cleared with her, such as the proposal of new uniform designs and themes for M Social Phuket, a trendy and upscale hotel in the heart of Patong, Thailand. The first phase of the hotel opened in November 2023.
The sudden departure of M&C’s CEO Clarence Tan after helming the hospitality arm for just four months hints at the challenging environment he had to deal with on top of the Covid-19 pandemic, the sources said. Tan was M&C’s CEO from April 2 to Aug 2 in 2020.
Before joining M&C, Tan was the managing director for South-East Asia and South Korea with InterContinental Hotels Group, where he was responsible for the growth and financial and operational performance of about 100 hotels in the areas.
During the course of the saga, old and more recent photos of Wu and the senior Kwek were discovered by the public and circulated on social media.
On March 4, he announced the resignation of Wu as “an unpaid independent adviser” to M&C’s board.
The older Kwek also said that with Wu out of the picture, it was time to focus on the issues that CDL has to address.
These included the China Sincere Property debacle that resulted in an extraordinary loss of S$1.9 billion (US$1.42 billion) for CDL in 2020; poorly judged investment decisions in the UK property market, which culminated in a 94 per cent fall in profits during the first half of 2023; and CDL’s share price performance since Sherman Kwek took the helm in 2018.
While the reconciliatory moves offer a small respite, they do not fully address the various corporate governance issues and board differences that were raised during the dispute, RHB analysts said.
Investors will still want to seek full resolution of these concerns, greater clarity on the company’s plan to maximise shareholder returns, and additional safeguards to prevent similar corporate governance and board-related issues from arising again, the analysts wrote in a note on the morning of March 13.
One analyst - who did not want to be named - questioned why Kwek Leng Beng and minority board members chose to publicly criticise the CEO for the Sincere investment when it was a board decision, which the younger Kwek chose to abstain from because he had proposed the project.
“Did Sherman go against what the board had decided? Who voted yes and no to the deal? Those who voted yes – are they still on the CDL board?” he asked, wondering how much culpability each party had.
The Sincere proposal was put to the CDL board for approval in early 2020. The cracks became evident during the three-hour-long meeting when the eight-person board of directors debated it vigorously.
Eventually, it came down to a narrow vote in favour of acquiring Sincere.
However, the fallout from the “game-changing investment” led Kwek Leng Peck, who is Kwek Leng Beng’s cousin, to resign in October 2020 as a director of CDL, a post he had held for over 30 years, after clashing with the board over Sincere and the management of M&C.
His resignation was followed by that of two other directors - Koh Thiam Hock and Tan Yee Peng - on concerns over the handling of the Sincere investment. - The Straits Times/ANN
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