Singapore’s largest listed property developer was plunged into crisis on Wednesday, when its chairman and patriarch Kwek Leng Beng accused his son — the chief executive officer — of attempting a boardroom coup at City Developments Ltd (CDL).
Billionaire Kwek, 84, said in a statement that he had sought to dismiss his son, Sherman Kwek, from the CEO position earlier in February due to what he alleged were “serious lapses of corporate governance”. However, Sherman had consolidated control of the company’s board, which prevented the firing, he said.
Leng Beng, along with three other board members and CDL, on Tuesday filed a lawsuit in Singapore’s courts against Sherman and six others on the board of directors, a move the chairman said was done “to set things right.” The father and son sit on the 11-member board, which has eight individuals that are listed as independent directors, according to CDL’s website.
“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,” Leng Beng said.
Sherman, in a statement on Wednesday afternoon, said he and a majority of CDL’s board were “incredibly disappointed” over what he said were extreme actions taken by his father and a minority of the board over a disagreement around its size and make-up. He said their goal has always been to improve governance.
CDL separately said Sherman remains its CEO “until such time as there is a board resolution to change company leadership”.
The family feud broke out into the open on the same day CDL released its 2024 results. Earlier on Wednesday, CDL reported a 37% plunge in annual profit to S$201.3 million (US$151 million), missing analysts’ estimates.
The company also issued a press release with comments from both Sherman and Leng Beng on the results. The CEO was quoted as saying that 2024 was “a year of formidable headwinds”, while the chairman stated that CDL “demonstrated resilience” in all key business segments last year.
CDL called for a halt in trading before the market opened and abruptly cancelled a post-results briefing that had been scheduled for Wednesday morning. The company said trading of its shares was temporarily suspended in light of the board disagreement, and that the “matter is currently under review” and business operations are unaffected.
Leng Beng said Sherman and some other directors had bypassed CDL’s nomination committee on two occasions to change the composition of the company’s board. The lawsuit, he said, “is necessary to deal with this attempted coup at the board level and restore corporate integrity”.
Leng Beng also said that all available legal options were being explored to protect the interests of CDL and its shareholders. “We intend to change the CEO at the appropriate time,” he said.
China saga
The boardroom tussle is set to reopen a longstanding rupture in the family that erupted a few years ago over a soured bet in a Chinese developer called Sincere Property Group.
Sherman, who is 49 this year, became CDL’s CEO in January 2018 and had led an effort to expand the company’s footprint in China. In 2020, Leng Beng’s cousin, Kwek Leng Peck, resigned from CDL’s board due to disagreements about the firm’s investment in Sincere. Other directors also resigned.
Eventually, following a property downturn in the world’s second-largest economy, CDL was forced to write off most of its investment in Sincere and incurred a loss of S$1.9 billion.
Leng Beng, in his statement, described the Sincere loss as “staggering”. He also said “poor investment decisions in the UK property market” made by Sherman caused significant financial losses, and pointed to how CDL’s share price has underperformed peers since his son became CEO.
CDL shares have slumped by close to 60% since the start of 2018, and the company has lost around S$4.6 billion as of Tuesday, according to data compiled by Bloomberg. The Singapore-based developer previously had a market capitalisation of more than S$16 billion at its peak in 2007.
Leng Beng said certain members of the board are still aligned with him, and “committed to upholding the highest standards of governance and accountability”.
He added that Kwek Eik Sheng, CDL’s chief operating officer and Sherman’s cousin, will serve as the company’s interim CEO “if and when Sherman is removed”, until a professional is appointed to lead the firm.
“In the near-term, a boardroom tussle between its chairman and his son who is the CEO may create an overhang on its shares,” said Ken Foong, an analyst with Bloomberg Intelligence.
The Kweks are one of Singapore’s wealthiest families. Leng Beng is the second-generation scion of Kwek Hong Png, who left China and migrated to Singapore as a teenager in the 1920s before founding Hong Leong Co in 1941.
Leng Beng took over the property empire and spearheaded a takeover of CDL in 1971 via Hong Leong Group, which he chairs. The conglomerate has assets spanning luxury hotels, financial services companies, and manufacturing operations across parts of Asia.
