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CONGLOMERATE Fraser & Neave (F&N) is dissolving a controversial $1 million-a- year consultancy agreement it inked with its chairman Lee Hsien Yang last year.
The consultancy fee will still be paid to Mr Lee - but it will be paid as director's fees instead.
That means it will be put to a vote by shareholders, according to F&N's annual report which was released yesterday.
Mr Lee joined the property, food & beverage and publishing conglomerate as its non-executive chairman last October, replacing Dr Michael Fam.
F&N's announcement that Mr Lee stood to earn an annual fee of $1 million a year as part of a consultancy agreement raised eyebrows at the time.
The term of the agreement is for three years with an automatic renewal for another three years. As a consultant, Mr Lee's role is 'to assist with the overall strategic planning for the group'.
An independent director of a company unrelated to F&N cited a potential conflict of interest. If management took suggestions to the board offered by Mr Lee in his capacity as a consultant, it would be difficult for the board, which Mr Lee chairs, to reject the plans.
There was also some beef over the amount - $1 million - being paid to a non-executive director. Usually, directors' fees are much lower.
The $1 million will now be added to the existing $250,000 Mr Lee will draw as a chairman. It will form part of the total $2.5 million fee that is up for shareholders' approval at the annual general meeting on Jan 31. The fees up for approval will relate to the financial year ending Sept 30.
An F&N spokesman said that this was done 'with a view to simplifying matters. It is much clearer this way. All directors' fees will be put to the shareholders' vote'.
Associate Professor Mak Yuen Teen, regional research director for the Asia-Pacific at Watson Wyatt, said: 'This makes much more sense. If a director is very involved at the company, it is only proper to pay more. The thing is to explain it to shareholders.'
The agreement will be dissolved on Jan 31. The consultancy fee will be built into the directors' fees. F&N said the requirements of Mr Lee's role remain the same.
'This recognises that the complexity of the business and involvement of Mr Lee as non-executive chairman in relation to the overall strategic planning for F&N, including management of relationships with F&N Group's business partners and succession planning, will require a certain commitment of time.'
Mr Lee said in his chairman's message in the annual report that 'a search for a new chief executive is under way' after the abrupt departure of chief executive Han Cheng Fong last October.
Dr Han, who had left following differences with the board, was paid $5.05 million as part of the terms of his contract - which include non-compete and non-solicitation clauses.
The annual report stated that Dr Han's remuneration for the financial year came to $4.7 million. F&N turned in healthy profits of $378.6 million for the year ended Sept 30 on the back of the sizzling property boom.
Its annual report also revealed that director Nicky Tan's firm pocketed a professional fee of $3 million.
The fee paid to nTan Corporate Advisory was for its services as an adviser to F&N in connection with the placement to Temasek Holdings in January last year.
Temasek invested about $900 million for a 14.9 per cent stake in F&N, making it the second-largest shareholder after OCBC Bank.
sushyan@sph.com.sg
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