Singapore-listed property developer City Developments Limited (CDL) executive chairman Kwek Leng Beng filed court papers against his son Sherman Kwek, the group’s chief executive officer, on February 26. The legal action made public a power struggle between father and son for control of the company.
The 83-year-old chairman accused his 49-year-old son and several board members of attempting a “coup” to take control of CDL’s board. He claimed they bypassed corporate governance protocols in the process.
Kwek Leng Beng took legal action against Sherman Kwek and board members Philip Lee and Wong Ai Ai. He stated they circumvented proper governance procedures to push through board changes without proper review.
“This is necessary to deal with this attempted coup at the board level and restore corporate integrity,” the elder Kwek said. He stated his intention to change the CEO “at the appropriate time.”
The dispute began on January 28, when an email about nominating two additional independent directors was sent to the board on the eve of Chinese New Year. The chairman stated that Chong Yoon Chou, the nomination committee chairman, was “completely unaware” of these nominations.
Despite objections about the rushed appointments, the board approved Jennifer Duong Young and Wong Su Yen as independent non-executive directors on February 7. This followed a written resolution circulated and approved within hours.
Kwek Leng Beng claimed the board received legal advice on February 5 that bypassing the nomination committee violated the Code of Corporate Governance. The appointments proceeded regardless.
“This confirmed that Sherman Kwek, Philip Lee, Wong Ai Ai and the other directors acting with them had pre-planned this move,” the elder Kwek stated.
On February 8, Kwek Leng Beng sent an email seeking his son’s dismissal as group CEO. The reconstituted board, led by Philip Lee, objected to this attempt the next day.
The chairman cited several instances where his son’s decisions allegedly hurt CDL financially. These included the Chinese developer Sincere Property Group investment that led to a $1.9 billion loss for CDL in 2020. He also mentioned investment decisions in the UK property market that contributed to a 94 percent drop in profit during the first half of 2023.
Kwek Leng Beng pointed to CDL’s share price performance since his son took leadership in 2018. At the start of Sherman Kwek’s tenure in January 2018, CDL’s share price was around $12.18, compared to $5.12 when trading was halted on February 26.
“As a father, firing my son was certainly not an easy decision,” said the senior Kwek. “I accept that business decisions are hard and young people may make business mistakes in their careers and that is understandable, but circumventing corporate governance laws is a red line.”
If successful in his legal action, Kwek Leng Beng proposed that the current chief operating officer, Kwek Eik Sheng, his nephew, serve as interim CEO while the group searches for a professional chief executive.
Sherman Kwek expressed disappointment over what he called his father’s “extreme actions.”
“It is incredibly disappointing that our chairman and a minority of the CDL board have decided to take these extreme actions regarding this disagreement around the size and make-up of the CDL board,” he said in a statement.
The younger Kwek stated that the board changes were implemented to improve governance, not to oust the chairman.
“These steps to strengthen our board have purely been to make sure CDL has the highest standards of governance to which it has become known, and our collective decision-making as a board is as solid as possible,” he added.
A CDL spokesperson confirmed that trading was halted due to the disagreement within the board about its composition. The spokesperson stated that business operations remain “fully operational and unaffected.”
Securities Investors Association (Singapore), or Sias, expressed hope that the board issue would “be resolved amicably among the related parties in the best interest of all CDL stakeholders.”
The $4.7 billion property giant has holdings in nearly 30 countries. It was bought by Kwek Leng Beng, his brother Kwek Leng Joo and their father, Kwek Hong Png, in 1971 when it was a loss-making company. Under the elder Kwek’s leadership, CDL grew to become a major hotel and property developer with an international presence.
