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SINGAPORE (Sept 17): The cover of Stamford Land Corp’s latest annual report is emblazoned with the phrase “Striking the right chord”. But this past week, the company hit all the wrong notes in dealing with a difficult and outspoken shareholder. On Sept 7, Stamford Land and five of its directors filed a writ of summons in the High Court against Mano Sabnani for making allegedly defamatory remarks, to the effect that they had “breached their fiduciary duties to Stamford Land and [are] guilty of offences under the Companies Act”.
A familiar face at annual general meetings of many SGX companies, Sabnani is also well-known to the media, having held the posts of editor-in-chief at The Business Times as well as Today. Stamford Land said in a Sept 9 filing that Sabnani had published defamatory statements in a July 27 Facebook post and a July 31 letter to the BT, and uttered defamatory statements at two AGMs, in 2016 and 2018.
It is unclear precisely what Sabnani said that Stamford Land is alleging to be defamatory. However, in his letter to the BT, Sabnani claimed he had been vilified and bullied at the company’s AGM. He also criticised the company’s “high-handed” conduct, alleging among other things that shareholders were limited to asking one question each. He also claimed that the company refused to provide its shareholders with drinking water: “I was told there was water in the toilet and I could quench my thirst there.”
Stamford Land denied in a letter dated Aug 31 that it had restricted the number of questions from each shareholder, or that its board or management had made the “toilet” remark. It also defended itself against criticism from Sabnani related to its leadership structure, high executive pay and low dividends.
For instance, Sabnani pointed out that the chairman was paid up to $5 million for FY2018 ended March, a sum close to three times the aggregate total remuneration of the top five key management personnel. Addressing the point in its Aug 31 letter, the company said that remuneration of its executive chairman Ow Chio Kiat and his son, CEO Ow Yew Heng, were based on recommendations by a consultant. Ironically, the consultant had been appointed after a complaint at the 2016 AGM, which, according to the minutes of the 2018 AGM released on Sept 3, had worried the company’s independent directors.
According to Stamford Land, the consultant found the remuneration of both the chairman and CEO to be inadequate. The consultant also recommended a formula that would peg part of their remuneration to the company’s performance. The remuneration committee accepted these recommendations.
Between FY2017 and FY2018, Chio Kiat’s remuneration band moved up $2 million, to between $4.75 million and $5 million. Yew Heng saw a $500,000 raise in his band to between $1.25 million and $1.5 million. In the same period, the company’s earnings were up 63.2% to $56.4 million. However, dividends remained flat at one cent a share. Stamford Land had $132.5 million in cash and $110.8 million in debt as at end-June.
Stamford Land is not the only company that has taken action against defamatory statements by its own shareholders. Only two months ago, Asiatic Group (Holdings) threatened to sue a dissenting shareholder, though the effort was later dropped. But it is not something that ought to be encouraged. Instead, the boards and senior management should take tough questions and rude comments constructively and simply correct any statements or assumptions that are untrue. There is, after all, no logical reason for shareholders of a company to want to destroy its value.
Mak Yuen Teen, a local corporate governance expert, said in a July blog post that there is little for a company to gain from issuing legal threats against minority shareholders. “[The] last thing we need is to have accounts of companies saying that they are recording proceedings of shareholder meetings and threatening to sue shareholders for defamation, or in fact doing so if they criticise the board or did not use the appropriate words in questioning the directors.
“If a company has destroyed significant shareholder value, or is oppressing minority shareholders, what else can minority shareholders do except to question and vent their anger?” It is unlikely that companies will always be able to maintain cordial relations with its shareholders, especially when business is bad. But resorting to legal action to silence critics who are also on the shareholder register could ultimately have a chilling effect on market interest in the company’s shares.
This Edgewise appears in The Edge Singapore (Issue 848, week of Sept 17) which is on sale now. Subscribe here