Date: March 7, 2024
To: Chairman and members of the Board,
Great Eastern Holdings Limited
We refer to the company’s response to a request by minority shareholders to table certain resolutions at the upcoming Annual General Meeting dated March 6, 2024 posted on SGXNet.
SIAS had the opportunity to meet with representatives of the minority shareholder group on March 6 to gain insight into the basis of their resolutions. It is evident that these shareholders are advocating for measures they believe will enhance shareholder value. SIAS is supportive of responsible shareholder activism that creates value for all shareholders and we recognize the importance of such initiatives in fostering a healthy corporate environment.
It is however surprising that Great Eastern has adopted a somewhat legalistic response to the tabling of resolutions by minority shareholders, a move which appears to sidestep the substantive concerns raised by the minority shareholders. While SIAS agrees that a listed company’s share price depends on many factors, including those beyond the immediate control of the board and management, it is imperative to address any persistent under-performance. Such discrepancies often signal a deeper misalignment between the company’s fundamentals and its market perception, posing long-term risks to all shareholders.
Drawing guidance provided by SGX RegCo to boards on shareholders’ requisitions, we want to emphasise to the Great Eastern board that it has to seriously and objectively consider the true purpose of the shareholders’ requests, and in this case, the three proposed resolutions. While activism from minority shareholders may be perceived as uncommon or even unwelcome, it is imperative for boards to assess the merits of proposed resolutions from the standpoint of the issuer and its shareholders as a collective. We echo SGX RegCo’s stance and encourage the GE board to proactively engage with shareholders to address their concerns, regardless of any differences in perspective, thereby facilitating a more transparent and responsive decision-making process.
SIAS does see significant value in getting a shareholder vote on the three proposed resolutions at the AGM. Each of these resolutions seeks to strengthen the alignment of directors’ interests with those of all shareholders, a principle that lies at the heart of good governance practices. Therefore, we believe it would be premature for the company to dismiss the tabling of these resolutions outright, especially based on a legal technicality. Instead, we encourage the board to exercise its discretion based on the spirit of the law to include these resolutions on the agenda for the upcoming AGM. Moreover, we urge the board to consider absorbing the marginal cost associated with including the resolutions proposed by the minority shareholders at the AGM, in the pursuit of promoting good corporate governance practices beyond mere box-ticking exercises.
SIAS further suggests to the remuneration committee that it considers paying 30% of the existing director fees in Great Eastern shares to directors in lieu of cash.
Lastly, SIAS would also like the management/board to provide greater clarity on the following questions:
– With SFRS(I) 17 Insurance Contracts replacing SFRS (I) 4 Insurance Contracts, can management clarify the primary impact areas of SFRS(I) 17 adoption on the P&L and the financial position? How has the embedded value been affected by SFRS(I) 17?
– To evaluate the company’s performance over recent years, can the company disclose the total shareholder return (TSR) trends over the past 3 years, 5 years, and since 2015 (which also roughly correlates with the tenure of the current Group CEO)?
– Has the board benchmarked the company’s performance against peer insurance companies?
– What are the key performance criteria used in the formal assessment of the board, including the weightages assigned to TSR and return on equity?
– Similarly, how are TSR and embedded value factored into the performance assessment of the Group CEO and key senior management executives, and what are their respective weightages?
– In FY2022, the Group CEO received $1.9 million in bonuses and $1.4 million in long-term incentives, out of the total remuneration package of $4.9 million. As detailed in the footnote, long term incentives are the fair value of share options under the OCBC Share Option Scheme 2001, award of deferred shares under the OCBC Deferred Share Plan and long-term incentive take-out. Can the remuneration committee disclose the total value of OCBC shares and OCBC share options received by the Group CEO since his appointment in November 2015?
– The chart below shows the share price trends of the company and of OCBC over the past 10 years. Considering the significant divergence observed in share prices between Great Eastern and OCBC over the past three years, does the board view this as an area of concern?
– Is the board actively exploring measures to strengthen the group’s remuneration and incentive practices, particularly regarding the allocation of OCBC shares to the Group CEO, considering his role primarily focuses only on the overall strategic direction and business growth of the Great Eastern Group?
SIAS is willing to meet with the Senior Management and the Board to discuss our concerns and to work out a win-win solutions to the issues raised by the concerned minority shareholders.
David Gerald
Founder, President & CEO
SIAS
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