(Feb 27): An alleged boardroom coup attempt, a lawsuit between a family patriarch and his son, and accusations of corporate governance lapses — even by the standards of Asian succession drama, the family feud raging at Singapore’s Kwek dynasty stands out. 

City Developments Ltd (CDL), the financial hub’s biggest listed developer, plunged into crisis on Wednesday when its billionaire chairman Kwek Leng Beng, 84, accused his son, the firm’s chief executive officer, of orchestrating a boardroom coup. He and CDL filed a lawsuit against the younger Kwek.

At stake is control of a major slice of an US$18 billion (RM80 billion) family empire spanning property development to hospitality and finance. It has also raised eyebrows in a region all too familiar with succession battles that often erupt into public view and occasionally wind up in court. Former casino baron Stanley Ho, property tycoon Lo Ying Shek, and the removal of New World Development Co’s scion CEO in Hong Kong are just a few examples. 

“Generational succession is always tricky, but even more so if the business experiences headwinds and the previous generation retains a position of power,” said Marleen Dieleman, a professor of family business at IMD Business School in Singapore. “The events at CDL today point to chaos.” 

The public kerfuffle caught the developer’s management by surprise on the same day it released annual results that missed estimates. The company abruptly cancelled its press briefing, and halted trading of its shares in light of the board disagreement. The firm’s market value is hovering at about a third of its 2007 peak, or about S$4.6 billion (US$3.4 billion or RM15.3 billion). 

The clash is already hitting market confidence. JPMorgan Chase & Co and UOB-Kay Hian Holdings Ltd downgraded CDL’s stock in light of the tussle, which remained suspended from trading on Thursday.

Leng Beng spent six decades building up the business after taking control of the loss-making CDL together with his father and brother. They later turned Millennium & Copthorne Hotels into Singapore’s largest international hotel group and one of the largest operators in the world. CDL has hotel, office and residential properties across 29 countries, according to its website.

Leng Beng built on the success of his father — the late Kwek Hong Png, who left China as a teenager to move to Singapore in the 1920s. The billionaire family made fortunes with a trading company called Hong Leong Co, and then expanded into hotels, real estate, financial services and manufacturing. 

Hong Leong Group employs more than 20,000 people and has assets of more than S$40 billion. It is the largest hotel owner in Singapore, and has a huge presence across Asia, owning the St Regis Singapore and JW Marriott Hong Kong. The family, through Kwek Holdings Pte Ltd, controls about 49% of CDL. Other investors include BlackRock Inc, Vanguard Group and the Government Pension Investment Fund of Japan, according to data compiled by Bloomberg.

When third-generation heir Sherman Kwek, 49, took the reins of CDL as the CEO in 2018, it seemed the family had managed to pull off a succession feat, avoiding any major drama for decades.

The Boston University-educated Sherman had worked within the family empire for more than two decades, following a stint at Credit Suisse First Boston.

However, his tenure soon became overshadowed by missteps in China. Sherman spearheaded an investment into Sincere Property Group in 2019, in a deal touted as “game-changing” for its expansion in Asia’s largest economy. 

A year later, it became a cautionary tale. After the country’s unprecedented property meltdown, CDL’s billion-dollar bet was almost completely written off. The “debacle” led to a S$1.9 billion loss in 2020, the elder Kwek said in his letter.

The pandemic pinched business further. Travel restrictions caused revenue to decline at the firm’s hotel operations during lockdowns. Leng Beng also said “poor investment decisions in the UK property market” made by Sherman caused significant financial losses. He said CDL shares had consistently underperformed peers since his son took over.

As the business suffered, internal disputes started arising. One of the family’s second-generation scions, Kwek Leng Peck, quit the CDL board in 2020 due to disagreements over the investment in China. 

“Sherman had a tough job from the outset,” said Dieleman. “This episode led to family fractures, doubts about the leadership, and a weaker balance sheet.”

Leng Beng said in his statement that he had sought to dismiss his son from the CEO position earlier in February due to what he alleged were “serious lapses of corporate governance”. Leng Beng, along with three other board members and CDL, on Tuesday filed a lawsuit in Singapore’s courts against Sherman and six other directors, a move the chairman said was done “to set things right”.

In particular, the elder Kwek objected to the appointment of two directors who were added to the board this month without going through the typical nomination process, according to his letter. CDL appointed Jennifer Duong Young, who spent 21 years at Credit Suisse, and Wong Su-Yen to the board, according to earlier statements.

“His role in circumventing good governance and consolidating power through the irregular appointment of two new directors was the latest of a long series of missteps,” Leng Beng said in his letter, referring to Sherman.

In a separate statement late on Wednesday, Leng Beng said the two new directors had undertaken not to exercise any powers until further notice of the court. The company’s nomination committee has also been suspended from taking further action.

Leng Beng said earlier the firm’s “commitment to long-term value creation and corporate stability” is now under attack. “The reckless actions of a faction seeking to consolidate unchecked control not only undermine the foundations of CDL’s governance, but also put at risk the very legacy we have built over the decades.”

Sherman responded in a statement that he and a majority of CDL’s board were “incredibly disappointed”. He said extreme actions were taken by his father and a minority of the board over disagreement around its size and make-up. He said their goal had always been to improve governance. 

CDL said Sherman remains as the group CEO “until such time as there is a board resolution to change company leadership”.

Leng Beng is no stranger to open battles. During his more youthful years, he upstaged Donald Trump by turning down the US tycoon’s request to keep managing the Plaza Hotel in New York, as part of his investment into the asset. 

“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 in his statement.

The elder Kwek 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 interim CEO “if and when Sherman is removed”, until a professional is appointed to lead the firm.

“The markets are very sensitive to family feuds,” said Mandy Tham, the academic director of master of science in wealth management at Singapore Management University. “Family feuds are unlikely to be resolved speedily, and some could not be resolved at all.”

Read also:
Singapore billionaire’s scion denies board coup, blames key aide
CDL board fight cools with undertaking from two new independent directors
Singapore's CDL chairman Kwek accuses son of boardroom coup attempt 

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