On Tuesday, 84-year-old chairman Kwek Leng Beng sued his son, 49-year-old CEO Sherman Kwek, accusing him of an “attempted coup” to take control of CDL’s board. He said in a statement that “serious lapses of corporate governance” at the multibillion-dollar real estate business had been “halted,” according to Nikkei Asia.
Here are five key points about the dispute.
Who are Kwek Leng Beng and Sherman Kwek?
Leng Beng and his family have a combined net worth of US$11.5 billion, ranking him as Singapore’s 4th richest person, according to Forbes‘ September 2023 ranking. As chairman of Hong Leong Group, which oversees CDL, he has transformed CDL into a global property developer. After studying law in London, he joined the family business in the 1960s and focused on managing CDL’s Singapore operations.
Sherman, a Boston University graduate, became CDL CEO in January 2018 after serving as deputy CEO and executive chairman of CDL China. He led expansions into Japan, Australia, and China, securing prime real estate in Shanghai, Suzhou, and Chongqing.
On Wednesday, his father criticized Sherman’s “poor investment decisions” in the U.K., which he said led to significant losses. He also pointed out that CDL had underperformed compared to its peers since Sherman took over.
What triggered the boardroom conflict?
The father-son clash escalated when Leng Beng filed a lawsuit in Singapore’s High Court to stop what he called an “attempted coup.” He accused his son of bypassing CDL’s nomination committee on multiple occasions to alter the board’s composition and make significant governance changes, according to Reuters.
Sherman responded that he and most of the board were “disappointed” by his father’s “extreme actions,” saying changes were aimed at “strengthening the board” and maintaining “the highest standards of governance.” Sherman has appointed a law firm to represent him in the legal battle and blamed his father’s adviser, Catherine Wu, for fueling the conflict, according to The Straits Times.
What is CDL’s position in real estate?
CDL, one of Singapore’s largest property developers, has a market capitalization of S$4.6 billion (US$3.4 billion) and operates in nearly 30 countries. It describes itself as “a leading global real estate company” with properties in 143 locations across 28 countries. Its portfolio includes offices, hotels, and malls in Singapore, China, Japan, and Malaysia.
Notable assets include Republic Plaza, a 66-story skyscraper in Singapore’s central business district, and Aldgate House, an office and retail development in London near Tower Bridge.
What is the current situation?
Trading of CDL shares was halted on the Singapore Exchange before the market opened on Wednesday. The company has not confirmed when trading will resume but stated that “business operations remain fully functional and unaffected.” On Tuesday, CDL’s shares closed at S$5.12, down about 60% from their early 2018 highs.
Following a court hearing on Wednesday, Leng Beng announced that Sherman and the directors supporting him had agreed not to make further changes to CDL’s board. He added that he would “provide further updates as necessary.” On Thursday, UOB Kay Hian downgraded CDL’s stock from “buy” to “hold”.
What are the corporate governance concerns?
Leng Beng’s call for “strong corporate governance” has reignited discussions about management standards in Singaporean companies, some of which have collapsed in the past due to poor oversight.
Professor Mak Yuen Teen, director of the Center for Investor Protection at the National University of Singapore Business School, told Nikkei Asia that CDL’s situation raised concerns over governance. He questioned why the proposal to appoint two new directors did not go through due process, calling it “misgovernance in a family company.”
“Succession planning is critical, and there will now be questions about continuing with family management at CDL,” he said.
