CDL’s Boardroom Battle: A Corporate Governance Crisis

City Developments Ltd. (CDL) is currently embroiled in a corporate governance controversy following a power struggle between its executive chairman, Kwek Leng Beng, and his son, the group’s CEO, Sherman Kwek. This dispute centers around the appointment of two new independent directors, Jennifer Duong Young and Wong Su-Yen, which has led to questions about the company’s adherence to proper governance procedures.

CDL’s boardroom feud sparks governance concerns and raises questions about its future

The Heart of the Dispute: Unconventional Director Appointments

The controversy began on February 7 when Sherman Kwek approved the appointments of Duong Young and Wong Su-Yen without going through CDL’s Nominating Committee (NC), which is responsible for recommending director candidates. Kwek Leng Beng claims that the appointments were made through a hasty written resolution and bypassed the usual review process. To make matters more complex, Sherman Kwek also merged the NC with the Remuneration Committee, a move many experts consider unusual since these committees have distinct roles.

Governance Concerns: Bypassing Established Procedures

Experts have criticized Sherman Kwek’s actions as not following the spirit of corporate governance guidelines, specifically the Singapore Exchange’s (SGX) Listing Rules and the Code of Corporate Governance. These guidelines require that the NC assess the suitability of candidates and that the appointment process be transparently reported. Legal experts argue that this bypass of the NC raises serious questions about CDL’s adherence to proper governance practices.

While some experts believe merging the NC with the Remuneration Committee could be acceptable under certain conditions, it is still seen as an unconventional move.

Impact on CDL’s Stock Price

The internal boardroom conflict has already had an effect on CDL’s stock price. Analysts from major firms have downgraded the company’s stock due to uncertainties about its leadership. However, despite the short-term pressure on the stock, analysts remain optimistic about CDL’s long-term outlook, particularly in its core businesses like property development and hospitality.

The Road Ahead: Will CDL’s Core Business Hold Up?

While CDL’s stock faces challenges due to the ongoing leadership drama, its core business is expected to remain strong. The company’s property development and hospitality sectors are forecasted to drive future earnings, with residential projects in Singapore and the hospitality division showing promise. Some analysts even believe that once the leadership issue is resolved, CDL’s stock could see a recovery.