A battle for control over City Developments Limited (CDL) between executive chairman Kwek Leng Beng and his son, CEO Sherman Kwek, led to the cancellation of the company’s FY2024 results briefing and a trading halt on the morning of Feb 26.
In a statement, the elder Kwek says: “Sherman Kwek, Philip Lee, Wong Ai Ai and a group of directors acting with them, have sought to consolidate control of the board and the group. Contrary to established corporate governance principles, the SGX Listing Rules and the Code of Corporate Governance, they bypassed the Nomination Committee (NC) on two occasions to change the composition of the board and hastily followed up by making significant changes to Board committees and the governance of the group.”
Kwek filed court papers on Feb 25 to “set things right”. He sees this necessary to deal with this “attempted coup” and to restore corporate integrity.
“We intend to change the CEO at the appropriate time,” says Kwek. “We will continue to explore all legal options available to us to vigorously defend and protect the interests of CDL and its shareholders.”
In his statement, the elder Kwek says CDL “already has internal measures in place” to ensure business stability in the absence of a CEO. “If and when Sherman is removed as CEO, the incumbent COO, Kwek Eik Sheng, will serve as the interim CEO, maintaining continuity while the group searches for a professional CEO. A professional CEO will be appointed to lead CDL moving forward.”
The elder Kwek had previously sought to dismiss his son on Feb 8. “His 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,” says the elder Kwek.
On Feb 9, the reconstituted board, led by Lee, objected to the chairman’s attempt to dismiss the younger Kwek.
The elder Kwek charges that under Sherman’s leadership:
- The Sincere Property debacle led to a staggering $1.9 billion loss for CDL in FY2020.
- Poor investment decisions in the UK property market resulted in significant financial losses, contributing to a 94% profit decline in 1HFY2023.
- CDL’s share price has consistently underperformed peers since he assumed leadership in 2018, reflecting eroded investor confidence and shareholder concerns over strategic missteps.
“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. 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,” says the elder Kwek.
CDL posted 36.6% lower patmi y-o-y for FY2024, while its gearing rose to 117%.
The Edge Singapore has reached out to CDL for comment.
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