Recently, I read an article from Dr Wealth about the highest paid CEOs among the listed SGX companies. The article is currently factually wrong. There are two entries he missed.
|#2||Dora Hoan Beng Mui||Best World Intl||$12.7m|
|#3||Doreen Tan Nee Moi||Best World Intl||$12.7m|
|#4||Kuok Khoon Hong||Wilmar Intl||$11.6m|
|#5||Wee Ee Cheong||UOB||$10.9m|
Of course this article is not to point out the wrong facts of a fellow investment blogger, but instead point to the questionable corporate investor governance of Best World International. To me, it seems the company is cutting off the riches to minority shareholders by reducing the dividends to zero while the majority shareholder who are the above 2, earn a large amount of wealth increasing salary while dividends are eliminated from all shareholders despite a cashflow positive business which is increasingly profitable.
Relative Size of Best World to Peers
Compared to the other three listed companies mentioned, Best World's net profit or revenue is not even 10% of the other 3 listed companies. However, its two co-chairwomen earn the same region of pay, with only DBS CEO Piyush Gupta earning more than them.
Even in its peers in the same industry such as Herbalife who earns 10 times their profit or revenue. its CEO earns less than each of the co-chairwomen.
How were Their Remuneration Benchmarked?
This is a question I am intrigued. Comparable large companies in their industry (such as Herbalife) do not pay their CEOs/Chairman that high and if we were to benchmark against all the listed Singapore companies, they are the second and third highest despite the business only being 10% the size of their SGX peers.
I am curious to how the Independent Board of Directors came to this decision.
The two Best World co-chairs salary is 20% of the company's net profits, while the other CEOs in the top 5 earn less than 2% of their respective company's net profits. Herbalife pays its CEO less than 2% of their respective company's net profits as well.
History of Remuneration
Best World International's increase in remuneration for its 2 co-chairwomen coincided when the company was suspended from trading by SGX. This is because the SGX regulators found its business model questionable. While it was suspended, the company decided to cut off its dividends to shareholders despite increasing profits; while at the same time increased the pay of the 2 co-chairs who were majority shareholders and would have received dividends if Best World International had continued to pay it.
Given the increasing profitability and continuous high pay of its key management, I am curious to how the Independent Board of Directors came to this decision of suspending the dividends.
Minority Shareholders have only One Low Price - $1.36 to Accept
Due to its suspension, minority shareholders are now only able to encash by an off market purchase exercise the company is offering at $1.36. This was the lowest share price traded in the prior 6 months, valuing the company at single digit price-earnings ratio and is about 20% lower than what could have offered according to its share buyback mandate.