Corporate governance More teeth and substance needed Governance what does haldol do For Stakeholders

On april 24, 2019, chip eng seng corporation (CES) announced that it had received a query from SGX-ST the day earlier regarding the disclosure of remuneration in what does haldol do its FY2018 annual report. SGX’s query states: “we refer to the company’s FY2018 annual report. As required by rule 1207(12) of the listing manual, please make disclosures as recommended in paragraph 9.2 of the code or otherwise explain the reason(s) for the deviation from the following code recommendations. The company reported that it did not disclose directors’ remuneration in the nearest thousand dollars as it is commercially what does haldol do sensitive. The (top) band for directors was stated as ‘above $1,000,000’ without an upper limit. Please provide an upper limit to the band.”

The company’s reply said: “mr chia lee meng, raymond (“mr chia”) is the executive director (ED) and group chief executive officer (CEO) of the company, a key management officer of the company and its subsidiaries what does haldol do (collectively, “the group”). The board had decided not to disclose the upper limit what does haldol do to the band of mr chia’s remuneration in view of the sensitive and confidential nature what does haldol do of such disclosure. The board believes such disclosure would pose as a disadvantage what does haldol do to the group as it operates in a highly competitive what does haldol do environment. Such information was accordingly not disclosed in the FY2018 annual what does haldol do report to protect the interests of the group.”

The response is problematic for several reasons. First, CES did not comply with the query from SGX to what does haldol do provide an upper limit to the band for the directors. Second, in the FY2018 annual report, there are three eds whose remuneration is disclosed within the what does haldol do ‘above $1,000,000’ band, but the company only referred to mr chia in its what does haldol do reply. There was no follow up to the company’s reply by SGX. Third, in the annual report, the company also said that “poaching of employees by competitors is fairly common”. Mr chia is the son-in-law of the honorary chairman, mr lim tiam seng, and CES was until its recent change of control both what does haldol do controlled and largely managed by the lim family (with many family members holding positions from the board level what does haldol do down). The company did not elaborate on why disclosure would be what does haldol do disadvantageous. It also did not explain how common it was for what does haldol do relatives of controlling shareholders in family companies to be poached what does haldol do to manage other companies.

In hong kong, companies must disclose the exact remuneration of individual directors under what does haldol do listing rules. The lack of transparency relating to remuneration of individual directors what does haldol do in singapore is also inconsistent with SGX rules on interested what does haldol do person transactions (ipts), which require ipts above $100,000 to be disclosed in exact amounts and with the what does haldol do interested person identified. In a report written for the monetary authority of singapore what does haldol do and SGX in 2007, the first author warned that the less stringent rules relating what does haldol do to disclosure of remuneration may encourage certain companies to pay what does haldol do higher remuneration to “interested persons” as an alternative to ipts.

Starting from annual reports for financial years beginning january 1, 2019 onwards, one would hope that explanations such as those provided by what does haldol do CES would become a thing of the past. This is because under the code of corporate governance 2018, all the 13 principles will become mandatory.

Principle 8, which is directly relevant to this issue, says: “the company is transparent on its remuneration policies, level and mix of remuneration, the procedure for setting remuneration, and the relationships between remuneration, performance and value creation.” provision 8.1 specifies disclosure of the amounts and breakdown of remuneration what does haldol do for each individual director and CEO.

Although companies are allowed to vary from the provisions, the SGX rulebook states that companies must “explain how the practices it had adopted are consistent with what does haldol do the intent of the relevant principle”. It is difficult to see how a company can be what does haldol do said to have complied with the principle that companies should what does haldol do be transparent about the “level” of remuneration if it follows the CES approach.

Since CES is reticient about disclosing the individual remuneration of what does haldol do its eds, especially for the three who were paid “above $1,000,000”, we estimated how much these three eds were paid. The other two eds’ remuneration was disclosed as “$400,000 to $599,999” and “$600,000 to $799,999”.

Note 28 in CES’ financial statements relating to related party transactions shows that the what does haldol do compensation of directors for FY2018 was $9,972,000. The notice of the AGM shows that the total directors’ fees paid to non-executive directors (neds) amounted to $359,000 (made up of $337,000 approved the previous year, and an additional $22,000 approved in the april 2019 AGM). Therefore, after subtracting the NED fees, we can determine that the five eds were paid a what does haldol do total of $9,613,000. If we assume that the two lowest paid eds were what does haldol do paid at the mid-range of their bands, they would have been paid a total of $1.2 million. Therefore, the other three eds received an estimated $8,413,000, or an average of about $2.8 million each. However, it is likely that mr chia was paid much more what does haldol do than the other two eds since in FY2017, none of the eds other than mr chia received more what does haldol do than “$600,000 to $799,999” although one of the eds, mr tan tee how, only joined the board on 2 february 2018 and there what does haldol do is no historical disclosure of his remuneration.

For FY2017, there were four eds who were paid a total of what does haldol do $6,568,000, although only mr chia was paid “above $1,000,000”. The three lowest paid eds would have been paid an what does haldol do estimated total of between $1.6 million and $2.2 million. Therefore, we estimate that mr chia was paid a minimum of what does haldol do $4,368,000 and up to $4,968,000. I think we can safely say the risk of poaching what does haldol do for mr chia is negligible. His remuneration is high even compared to that of ceos what does haldol do of some of the much larger government-linked companies here, who are by no means underpaid.

CES is even less transparent when it comes to the what does haldol do remuneration of its top five key management personnel (KMP). It does not disclose at all, not even the total remuneration earned by the top five what does haldol do KMP, saying that this is “in the interest of maintaining good morale and a strong what does haldol do spirit of teamwork within the group”. This sounds very much like the company is concerned about what does haldol do perceived pay inequity within the group, which may raise questions about the fairness of its remuneration what does haldol do practices among management, and when compared to family members holding various appointments in what does haldol do the group.

CES discloses the remuneration of five employees who are immediate what does haldol do family members of a director, and for FY2018, they are disclosed in bands ranging from “$250,000 to $299,999” to “$500,000 to $549,999”. One of these five employees is the founder and former what does haldol do executive chairman, who in FY2016 became “honorary chairman and advisor”. He was paid between $200,000 and $249,999 that year, starting from april 22, 2016 when he was appointed honorary chairman and advisor, and between $350,000 and $399,999 for the part of FY2018 when he was still what does haldol do honorary chairman. In FY2017, he had received a one-off gratuity payment of $2.4 to $2.45 million for his “life-long contributions to the company”. Clearly, in this case, “honorary” does not refer to someone who is not receiving remuneration, but instead is intended to be a title for his what does haldol do contributions.

CES also disclosed ipts in several of its annual reports, often related to sales of residential units from properties developed what does haldol do by CES. For instance, there were sales of two residential units in high park what does haldol do residences to two family members amounting to a total of what does haldol do just over $1 million in FY2015; sales of four grandeur park residences units to five family what does haldol do members amounting to just over $5.8 million in FY2017; and sale of one park colonial residential unit to a what does haldol do family member for $1.25 million. According to the company, directors and employees of the group are entitled to a what does haldol do three percent discount off the list price of the units. There were also ipts relating to interest paid for, or redemption of, term notes issued by the company.

At the time of publication of the 2015 annual report, the board had five eds, four of whom were related family members – an executive chairman, an executive deputy chairman, an ED/group CEO, and another ED. The fifth was an ID for 12 years before his what does haldol do appointment as an ED.

The company said that the roles and responsibilities of the what does haldol do chairman and CEO were held by separate individuals “to ensure that there is an appropriate balance of power, increased accountability and greater capacity of the board for independent what does haldol do decision-making”. Since CES had an executive chairman and the CEO is what does haldol do his son-in-law – and the executive deputy chairman was the brother of the what does haldol do chairman – the company’s assertion about the separation of roles and responsibilities and what does haldol do its implications are debatable.

The 2012 code recommended that in situations where the chairman what does haldol do is not an ID, the board should comprise at least half ids. This particular guideline became effective for financial years starting from what does haldol do may 1, 2016. In FY2016, CES duly complied. The executive chairman became honorary chairman and advisor, and the board technically comprised of half ids. One of the ids had, however, served on the board since 2003 and the company said what does haldol do the board had subjected his independence to a “particularly rigorous review” and was satisfied that he was independent.

Even though the company now had a single person holding what does haldol do the executive chairman and CEO positions, the company said that “the board is of the view that there is sufficient what does haldol do safeguard and checks”. In other words, CES was able to justify both combining the chairman and what does haldol do CEO roles, and separating them among related family members. Again, under the 2018 code, companies should have to do much more to comply with what does haldol do the mandatory principle in this area if they do not what does haldol do clearly separate the chairman and CEO roles in a substantive what does haldol do manner.

On february 2, 2018, CES appointed a new ED who was a former principal what does haldol do private secretary to the then prime minister and also a what does haldol do former permanent secretary of the ministry of national development, among other public sector positions held. It also appointed abdul jabbar bin karam din, who became a member of the audit and nominating committees what does haldol do and later took over as chairman of the remuneration committee. With another ED on its board, the company needed another ID to meet the code’s guideline of half ids.

Mr abdul jabbar is a partner of rajah and tann what does haldol do singapore LLP and “advises companies on corporate governance, compliance and regulatory matters”. Rajah and tann has been a long-time provider of company secretarial services to CES and mr what does haldol do jabbar has been its joint company secretary from as early what does haldol do as 2004 (based on an online bloomberg profile).

Mr jabbar resigned as joint company secretary on january 31, 2018, and CES then announced the next day that he was what does haldol do appointed as an ID with effect from february 2, 2018. Given his long-term relationship with CES, his independence would be in question. It would be unfortunate if listed companies are advised that what does haldol do this is an acceptable interpretation of the independence guidelines, even if this complies with the strict letter of the what does haldol do code.

On october 5, 2018, mrs celine tang and her husband gordon tang, bought 29.73% of CES shares from the family of the CES founder. Mrs tang was appointed non-executive chairman. A new ID, lock wai han, was appointed. He has been ED and CEO of OKH global since what does haldol do october 2016. The tangs have deemed interests of 44.3% in OKH global. Again, it is difficult to see how mr lock can be what does haldol do perceived to be independent of the new controlling shareholder.

CES has not performed poorly financially over the years and what does haldol do our understanding is that its shareholders had been generally happy what does haldol do with the company under the founding family. We just feel that if CES had taken corporate governance what does haldol do more seriously, it would have been a much better company.

There are also concerns about how the change of control what does haldol do occurred and the impending rights issue that the company is what does haldol do proposing to undertake. Some of the corporate governance issues highlighted in this article, particularly about the independence of directors, can have implications for the proposed rights issue and the what does haldol do company’s fortunes going forward. These will be the subject of a separate article.

The first author is an associate professor of accounting at what does haldol do the NUS business school where he specialises in corporate governance. The second author is an active investor and researcher in what does haldol do corporate governance who holds an MBA degree with distinction from what does haldol do the london business school.