Guidelines needed to protect minority shareholders

In these challenging times, many public-listed companies, especially in the oil, gas, shipping and marine sectors, are getting delisted, being taken over by major shareholders/private funds, or filing for bankruptcy protection.

Many public-listed companies have less than $200 million market capitalisation, and may not be very profitable or even be on the verge of bankruptcy.

Yet they pay their top management millions of dollars, with exorbitant bonus packages and car and country club benefits.

Minority shareholders are usually given no or minimum dividend because there is hardly any money left. If the company delists, they often have no choice but to sell their shares, usually at a loss.

It is time for the Monetary Authority of Singapore (MAS), Singapore Exchange (SGX) and banks to do more to protect minority shareholders.

These are some of the ideas that come to mind:

There must be guidelines or even regulations for public-listed companies to give out at least 50 per cent of their net profits as dividends to shareholders.

No shareholder should, directly or indirectly, own more than 25 per cent of a company's issued shares.

The chief executive officer's annual salary and bonus should be no more than 1 per cent of the company's net profit, or no more than $500,000 plus six months' bonus, whichever is applicable.

Also, 50 per cent of the senior management's bonuses must be given in the form of shares, based on the company's share price on a set date, vested over a period of two to three years.

Top managements should not be paid in excess of 5 per cent of the company's net profit in bonuses.

The MAS and SGX must also make sure that an independent director does not sit on the board of more than three public-listed companies.

The fee for independent directors should be based on 0.01 per cent of the company's net profit, or $50,000, whichever is higher. There must also be a clawback clause in their bonus payout.

Delisted companies must not be allowed to relist or list in another form for 10 years.

Banks must also be made liable for selling bonds or financial products for public listed companies with no strong financials, especially for those with high debt and negative cash flow.

David Goh Chee Hoe

A version of this article appeared in the print edition of The Straits Times on August 29, 2017, with the headline 'Guidelines needed to protect minority shareholders'. Print Edition | Subscribe