The recent events at City Developments Limited (CDL) have highlighted a dramatic power struggle within the company, placing the spotlight on the unfolding father-son conflict between executive chairman Kwek Leng Beng and his son Sherman Kwek, the group’s chief executive officer. As CDL navigates through its 60th anniversary, the attention on their corporate governance and leadership decisions reveals a complex battle that might determine the future course of the company’s legacy and investor confidence.
The Central Figures and Positioning
Kwek Leng Beng, who will be 84 in 2025, has taken legal action against his son and certain board members, alleging an attempted coup to consolidate control over CDL’s board. This move comes as Kwek Leng Beng, who holds a controlling interest in CDL through the Hong Leong Group, emphasizes the urgent need to restore corporate integrity and uphold the principles of good governance within the company. The elder Kwek’s actions have raised questions about the balance between maintaining control and upholding governance standards in the face of familial ties.
Sherman Kwek, 49, has expressed his disappointment over his father’s drastic measures, insisting that his intentions were not to remove the chairman but were instead rooted in disagreements over the board’s size and composition. His statement highlights the support he enjoys from the majority of CDL’s board of directors, who view the chairman’s actions and those of a minority as too extreme. The contrasting perspectives of Kwek Leng Beng and Sherman Kwek expose divergent views on how to navigate the company’s future amidst internal conflicts and evolving governance challenges.
Chronology and Specific Incidents
The unfolding events began at the start of 2025 when the CDL corporate secretary informed the board on January 28 about the nominations of two new independent directors, Jennifer Duong Young and Wong Su Yen, proposing their urgent approval. However, these nominations and the subsequent appointments on February 7 faced immediate objections from Kwek Leng Beng and the Nomination Committee (NC) chairman, Chong Yoon Chou, citing violations of corporate governance procedures. The primary issue revolved around these actions bypassing scheduled NC meetings and proper vetting processes, raising significant governance concerns.
Kwek Leng Beng detailed his objections and ordered the cancellation of all director interviews, emphasizing the necessity for transparency and adherence to established procedures. Nonetheless, a board meeting on February 7 saw the rapid approval of the new appointments via a Directors’ Resolution in Writing, which suggested pre-meditation by Sherman Kwek, Philip Lee Jee Cheng, Wong Ai Ai, and their supporters. This incident marked a critical juncture in the power struggle, challenging the established governance norms and pushing the chairman to take legal action to address these perceived infractions within the board.
Governance and Corporate Control
Following the disputed board appointments, Kwek Leng Beng called for his son’s dismissal on February 8, an act met with resistance from a reconstituted board led by Mr. Lee by February 9, deepening the internal conflict. The chairman’s grievances extended beyond this latest episode, pointing to prior strategic missteps under Sherman Kwek’s leadership. Notable examples included the problematic involvement with Chinese developer Sincere Property Group, which resulted in significant financial losses, and poor investments in the UK market that led to a stark drop in profits. These decisions, coupled with the consistent underperformance of CDL’s share price, severely eroded investor confidence and fed into the broader governance crisis.
Kwek Leng Beng underscored the fundamental necessity of adhering to corporate governance norms, criticizing the recent restructuring efforts, like the shift from the Nomination Committee to a combined Nominating and Remuneration Committee (NRC). He argued that this move was designed to centralize power within Sherman Kwek’s faction, curbing independent oversight and diminishing his authority despite his extensive institutional knowledge. This restructuring was seen as an attempt to sideline critical checks and balances essential for maintaining good governance, raising further concerns about transparency and accountability within CDL’s leadership framework.
Broader Implications and Reactions
His concern extended to the implications of the NRC’s formation, which facilitated arbitrary appointments and control over board membership and senior management decisions, undermining independent oversight and essential checks and balances critical to good governance. In response, he called for Sherman Kwek’s removal, proposing Kwek Eik Sheng, the incumbent chief operating officer, as interim CEO while searching for a long-term professional CEO. This strategy aimed to stabilize the company and restore confidence among investors and stakeholders, emphasizing the importance of governance principles over familial relationships.
The unfolding family drama and governance issues come at a significant time for CDL, as it celebrates its 60th anniversary. Founded in 1971 and built into a prominent hotel and property developer, CDL’s stability and adherence to governance principles are critical, given its extensive international footprint spanning nearly 30 countries. The stakes are high as the company faces internal challenges that could impact its reputation, market performance, and the confidence of its diverse array of stakeholders who have long relied on its strong governance and leadership track record.
Stakeholder Insights and Expert Opinions
The tension at CDL has drawn scrutiny from various quarters, including David Gerald, president of the Securities Investors Association (Singapore) (Sias), who has expressed hopes for an amicable resolution that aligns with the best interest of all stakeholders. Gerald’s comments underscore the urgent need for the board to resolve these issues constructively, emphasizing the potential long-term implications of the ongoing power struggle for the company’s future and investor trust. The spotlight on CDL’s internal conflict has prompted broader discussions about governance practices, particularly in family-controlled businesses and their potential vulnerabilities.
Professor Lawrence Loh from the National University of Singapore Business School has highlighted the critical importance of corporate governance, especially for a listed family business like CDL. He emphasized adherence to the code of corporate governance and recognized the essential role of the Nomination Committee in maintaining good governance by properly vetting and recommending board appointments. Professor Loh’s insights reflect a broader consensus on the importance of robust governance practices as a foundation for stability and growth, particularly in companies with deep-rooted family involvement in their leadership structures.
Regulatory Perspective
Recent developments at City Developments Limited (CDL) have shed light on a significant internal power struggle, bringing attention to the intense conflict between executive chairman Kwek Leng Beng and his son, Sherman Kwek, the group’s chief executive officer. As CDL celebrates its 60th anniversary, the scrutiny on their corporate governance and leadership choices unveils a multifaceted clash. This battle could potentially shape the company’s legacy and influence investor confidence moving forward. The unfolding familial tension adds an additional layer of complexity to the situation, as decisions made during this critical period are likely to leave a lasting impact. The corporate community and shareholders alike watch closely, fully aware that the outcome of this power struggle may set the trajectory for CDL’s future. In navigating these turbulent waters, the company’s ability to steer through leadership challenges will be pivotal in ensuring its continued success and stability.
