CP All Plc's top executives have been facing intense pressure from investors who are questioning the company's corporate governance (CG) policy after no action was taken by its board of directors on executives found guilty of insider trading.
Four CP All executives were fined by the Securities and Exchange Commission for using inside information to purchase shares of cash-and-carry giant Siam Makro Plc ahead of the company's announcement it would buy out Makro at above-market value.
Executive board chairman Korsak Chairasmisak, who was fined the highest amount for the incident, told the press the parent firm Charoen Pokphand did not require any action for the infraction, then questioned investors' preference for CG or the ability to make a profit.
The incident caused investors to wonder whether the executives were trustworthy or ethical.
On Tuesday, the Thai Investors Association (TIA) issued a statement calling for an independent director of the company to represent retail investors.
It also asked listed companies for a CG policy clarification about appropriate action for those found guilty of insider trading.
The statement said retail investors were deeply concerned over the insider trading case, as it affected their confidence.
Insider trading directly affects the market's credibility, it said.
The TIA said the Thai bourse was a global investment community, and profitability was not the ultimate goal for investors and businesses, adding that the public was also a stakeholder.
Mr Korsak on Tuesday reiterated the guilty executives would remain in their positions even as some investors called on them to resign.
However, one of the fined executives, Athueck Asvanund, a vice-chairman and group counsel of True Corporation, resigned from the board for CG and corporate social responsibility at Krungthai Bank, effective immediately.
"His resignation letter said he had too many obligations," said Somchai Sujjapongse, board chairman at Krungthai Bank.
Mr Somchai, also finance permanent secretary, said he had assigned bank president Vorapak Tanyawong to review the case and seek appropriate action late last week before receiving the resignation.
Over the past 10 years, 61 executives of 27 stocks listed on the Thai bourse have been fined for insider trading, with fines totalling 212.8 million baht, the TIA said.
Voravan Tarapoom, chairwoman of the Association of Investment Management Companies (AIMC), previously requested CP All's board members take appropriate action.
The AIMC will discuss with institutional investors about a consensus position before calling a meeting with CP All executives, she said.
"CP All's executives are asking to meet with the AIMC, but we need to ask our members how they want to respond," Mrs Voravan said.
She said this case had made a significant impact on the market, as she had been bombarded by questions from fund managers and asset management companies about what if any action would be taken.
CP All was the biggest loser on the stock market last week due to the insider trading report.
Furthermore, the Siam Makro deal increased the company's debt-to-equity (D/E) ratio to 4.6 for the first nine months of this year, making some investors question the move's effect on CP All's business operations.
However, analysts still believe the company will continue to perform strongly, as it benefits from the government's stimulus package, which should raise domestic consumption.
A beneficiary could be CP All's core business, 7-Eleven convenience stores.
A KGI Securities analyst said the case might not affect the company's fundraising plans in the future despite its poor reputation, as CP All had no major investment plans in the near term.
"CP All's D/E ratio may improve to three by year-end and two by 2017," the source said.
The company expects to maintain its sales growth this year at 1.5%, rising to 3% next year despite the slowing economy. Store expansion will be a major factor supporting revenue growth.
For cash-and-carry Makro, despite its narrow margin it has relatively low operating costs, helping it to maintain an acceptable margin.
KGI projects a full-year net profit of 13.2 billion baht for CP All, up by 30% from last year, and 16.7 billion next year, up by 26.5%.
Phatra Capital managing director Therapong Vachirapong said CP All might feel the pinch in terms of share price, as many funds factored in CG policy for investment.
"If the company removes troublemaking management, it will affect the shares prices in the short term as the business plans may be disrupted," he said.
"For the long term, we'll only see an impact if the business vision significantly changes, not if the executives are removed."