A dispute over how executive directors' bonuses were computed has led to the resignation of the only two independent directors of civil engineering and construction group Lian Beng.
In past years, the company has worked out the performance bonus based on profits before netting off minority interest, said Lian Beng in a filing to the Singapore Exchange yesterday.
"Recently, the two former independent directors have raised issues in that they felt that the performance bonus provision for the company's financial year ended May 31, 2014, should have been computed based on group profit before taxation after minority interest."
The two independent directors who resigned from the board last Friday are Member of Parliament Sitoh Yih Pin, and former minister of state Wan Soon Bee. They have held the posts since 1999. Mr Sitoh, 51, Potong Pasir MP, was also chairman of the board's remuneration committee and a member of its audit and nominating committees.
"Dr Wan and I have spoken to the SGX on the phone yesterday, and we intend to meet the SGX to provide a full account of what happened," said Mr Sitoh in an interview with The Straits Times.
Dr Wan and I have spoken to the SGX on the phone... and we intend to meet the SGX to provide a full account of what happened.
MEMBER OF PARLIAMENT SITOH YIH PIN, who, together with former
minister of state Wan Soon Bee, resigned from the board
The firm said the two independent directors have also requested for re-computation of the executive directors' performance bonus starting from 1999, when the Lian Beng was listed, to be based on "after minority interest", with adjustment to be made to the pay of the executive directors accordingly.
The three executive directors are siblings Ong Pang Aik, Ong Lay Huan and Ong Lay Koon, who were paid between $2 million and $5.5 million each in the 2014 financial year.
The minority interest in the financial year ended May 31, 2014, was $39.9 million, compared with $18.6 million in the previous year. Computing the performance bonuses before netting off minority interest meant that the bonuses were calculated based on a profit of some $127 million, instead of $87 million.
The Straits Times understands this has raised the issue of whether such computation is fair and equitable to the shareholders of the firm.
It is unknown what has triggered the two independent directors' differences in opinion from the firm's management regarding the matter.
However, the firm said that, as stipulated in the service agreements signed with the executive directors in 1999, their performance bonus is computed on net profits before tax and extraordinary items.
The firm has always been consistent in its practice since 1999, it said.
It has also consulted an independent professional party and their practice was in line with the provisions of the executive directors' service agreement, the firm said.
The firm's external auditor has also reviewed the matter and has issued an unqualified report thereon.
Lian Beng's share price fell 0.93 per cent to close at 53.5 cents.