MAS is now finding ways to boost the development and attractiveness of the stock market. I do hope MAS is reading this because in my view, the main reason why SGX has lacked in development is due to the poor reputation created by current listed CEOs especially in how they have treated shareholders. Often, it is how minority shareholders are paid a small portion of the company earnings as dividends while the owners take a large stake as salary. This unfairness causes many shareholders to avoid SGX.
Many Listed CEOs treat Minority Shareholders like Shit
An often used term is "Minority Shareholders", many companies on SGX are structured in a way that minority shareholders do not have much influence and have to leave it to the management power in sharing the wealth/earnings with the minority shareholders. Independent directors do not have much power or incentivised to help the minority and are friends of the controlling shareholder.
Many listed CEOs take this as an opportunity to disproportionally treat minority shareholder poorly. Activists have tried but due to the families having controlling stake, nothing can be done. Here are a few companies out of the many who has treated shareholders poorly.
Best World International
Profitable company that is cashflow generative. However, in recent times, it withheld dividends paid to shareholders and increased the pay of its top 2 chairwomen (who own significant stake).
If one do the maths, their increase in salary matches the dividends they would have received if Best World continued its dividend. In a way, Best World was trying to force minority shareholders to give up owning a profitable company. End state, the company is now going for a delisting after an attempt was done to vote out all its independent directors who have done nothing for minroity shareholders. Many shareholders who have not received dividends for years are now giving in, realising how poor in attitude the 2 chairwomen are.
Great Eastern
There has been a conflict of interest where even Great Eastern Directors are paid in OCBC shares, who is the majority and controlling shareholder of Great Eastern. Great Eastern has been giving paltry dividend to shareholders and now even in the current delisting, has been trying to strangle shareholders to give up by offering an "unfair" two pricing strategy. This speaks how poorly OCBC treats shareholders of its subsidary.
Sing Holdings
A cash rich property developer who is now sitting on a pile of cash. It has not much property development and is paying its controlling family a high salary in proportion to the company's net profit while giving a small amount of dividend to minority shareholders. Shareholders tried to mount a challenge in 2016 but failed
Hong Fok Holdings
Profitable hotel operations and yet gives little dividend to shareholders while paying a high salary to its family members
Lion Teck Chiang
Sat on valuable freehold land in Paya Lebar. Despite the profitable operations, LTC paid paltry dividends to shareholders and then did a delisting to buy off shareholders who grew tired waiting for asset monetisation plans. Asset monetisation only happened when LTC was delisted and the controlling family reaped the full gains.
Conclusion
To sum up, the poor investor sentiment and reputation of SGX is due to the poor attitude of company CEOs. They do not want to share the wealth fairly with shareholders. The listed companies I have mentioned above are not within 1 industry but is across many Singapore industries.
Until SGX and MAS understand the problem and starts to allow Independent directors to be more vocal and not allow the friends/families of the controlling shareholders to be independent directors, the problem will not be solved.
How Things Can be Solved
It does not take a Minister of the State to look into the problem to realise what is wrong, it just takes an individual to understand the problem statement, the conflict of interest happening in Singapore and then thinking of the legislative power to balance the fairness. The role of an independent director is going to be very important and they have to be neutral individuals who will work for the interest of minority shareholders and be paid like how a minority shareholder.
Alternatively, one idea is to have independent directors who are part of the MAS headcount. They will be civil servants who are required to act in the interest of minority shareholders and can be terminated by MAS if found not acting in good faith for minorities. If the companies they are sitting on are difficult, these MAS staff can raise it to MAS's chairman on the unfairness. Their pay will be funded by the independent director fees and listing fees.
No comments:
Post a Comment