Rubbing salt into SP Setia’s wounds

MARCH 26, 2015, 6:55 PMBY KHAIRIE HISYAM

If SP Setia shareholders had hoped that the worst is over for the company’s transition to the post-Liew Kee Sin era, they would be disappointed to learn that current senior bigwigs in SP Setia are shareholders — major shareholders at that —  in a public-listed direct rival. And yes, could it have been any other company but Eco World?

Here’s a simple question: What does SP Setia’s name mean? That’s a no-brainer — SP stands for Syarikat Pembinaan (Construction Company) while Setia means loyalty in Malay.

Given the meaning of the latter word, the average SP Setia shareholder must now be scratching their head in dismay and befuddlement at the strange irony of the men helming the company also holding shares in a direct rival, as it turned out.

Zaki Azmi

So which men in particular, exactly? According to Eco World Development Group’s 2014 annual report, as of Jan 22 this year SP Setia’s chairman Zaki Azmi, acting president and chief executive officer Khor Chap Jen and the latter’s deputy Wong Tuck Wai all own Eco World shares.

Zaki, according to the report, is SP Setia’s third largest shareholder with 3.77% or 19.12 million shares as of Jan 22. They have a market value of RM37 million according to last Wednesday’s closing price of RM1.94 per share.

In turn Khor’s and Wong’s stakes are not insubstantial. They own 2.29 million and 1.53 million shares respectively as of Jan 22 this year. The shareholdings come to 0.45% and 0.3% respectively of the outstanding shares base at that point.

According to last Wednesday’s closing price of RM1.94 per share, the market values of Khor’s and Wong’s stakes are RM4.44 million and RM2.96 million respectively.

This escalates the SP Setia-Eco World quandary to heights unseen in Corporate Malaysia’s recent memory. That the board chairman as well as the two foremost management executives of a public-listed company are shown to have personal interests in a public-listed direct rival boggles the mind.

It is a deeply regrettable situation that none of them should have gotten into in the first place, especially Zaki who is a former chief justice, of all things.

What could they have been thinking? Surely Zaki of all people realise the inherent wrongness in what he was doing and as chairman advise Khor and Wong accordingly.

For perspective, just imagine what uproar there would be if say the chairman of Shell takes up a stake in Esso. There would even be a mob of shareholders waiting to tear limbs apart, perhaps.

In turn the unique situation between SP Setia and Eco World casts a stark light over the whole matter — are these three men waiting to jump ship too?

And now the big burning question for SP Setia shareholders is whether this means the great talent exodus is not yet over.

Recall the open secret that SP Setia staff had resigned in droves to transfer directly to Eco World, making up some 80% of the latter’s workforce as of last year according to a research house.

This was in addition to the host of former SP Setia bigwigs who led Eco World’s emergence onto the property scene in late 2013, some of them having spent more than two decades individually at SP Setia.

And don’t forget the surprisingly quick appointment of Liew Kee Sin, who had helmed SP Setia for close to two decades up to his exit in end-April 2014, to Eco World’s board in the first week of May 2014.

Liew Kee Sin

Despite citing a wish to retire for his departure, Liew seemingly changed his mind to join his son, an executive director in Eco World as well as a substantial shareholder, whose stake Liew and his wife paid some RM124 million for.

There is also the exit of Liew’s right-hand man Voon Tin Yow, the former’s chief operating officer at SP Setia for nearly two decades, in end-December only to surface as Liew’s partner in private vehicle Eco World Investment Co Ltd not two weeks into 2015.

For the record, Voon was appointed an executive director in Eco World earlier this month.

By now perhaps the average SP Setia shareholder may be hoping the worst of the company’s astounding talent drain is over. Perhaps they dared hope for a new beginning, building upon where the company is at now to a new future post-Liew and company.

Alas, that is not to be. How can SP Setia move forward at full speed with the sitting chairman and the two foremost management executives facing such conflict of interest?

Directors’ duties to a company are clearly outlined in the Companies Act 1965.

Section 132 of that Act stipulates that a director must “act honestly and use reasonable diligence in the discharge of the duties of his office” and this not only includes the obligation to act in the company’s best interests but also to avoid conflicts of interests at all times, according to material from the Companies Commission of Malaysia (CCM).

And the conflict here is clear. In view of the men’s shares in Eco World, their personal interests are served by Eco World’s progress and growth. However their duties lie with advancing SP Setia’s own position in the property market, in which Eco World also competes.

It may be argued that they can be let off so long as they openly declare their interest in Eco World to SP Setia, but in practical terms this is mere technicality — they are bound by duty not to even be in such positions of conflict in the first place.

Even if they uphold their duties as SP Setia men first ahead of their personal interests in Eco World, the fact remains that the conflict and potential breach of duty towards SP Setia shareholders remain hanging over their heads with every passing day.

And the biggest wonder of all is that SP Setia’s majority shareholders with a stake of  just under 70%, Permodalan Nasional Bhd, set up in the seventies to increase bumiputera ownership and participation in the economy, stands by and merely watches it happen.

Meantime, salt is being repeatedly rubbed into SP Setia’s open wounds — but no one seems to care, even when SP Setia’s own sitting chiefs are doing the rubbing.

GRRRRR!!!