On March 7, David Gerald, CEO and President of Securities Investors Association Singapore (SIAS) wrote to the the board of Great Eastern Holdings G07 with some observations and some questions. Among the questions he asked were on the remuneration of GEH senior management with stock options of Oversea-Chinese Banking Corp shares.
In GEH’s 2023 AGM in April 2023, minority shareholders had questioned why GEH top management were remunerated with OCBC shares. OCBC owns 88% of GEH. This remuneration had always felt uncomfortable to market watchers. GEH top management should be incentivised with GEH shares, they have argued for the past 20 years.
“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?” Gerald had asked.
On March 28, GEH replied. ”The GEH Group’s remuneration and incentive practices are periodically assessed as part of the reviews of the overall remuneration framework by the Board Remuneration Committee. The Group CEO’s total compensation takes into account both market competitiveness and benchmarks, as well as GCEO’s performance which include the Group’s overall operational and financial performance as well as the fulfilment of his other key performance indicators.”
GEH’s minority shareholders would have been more reassured if the reply had been that the board would consider rewarding GEH’s top management with GEH shares. That would be good corporate governance, they argue.
Additionally, on the point about GEH's share price performance versus OCBC's, the board said: "Share price is a function of market forces which are affected by multiple factors, many of which are not within the Company’s control. Management continues to grow the Group’s businesses and improve their operational and financial performance. Management also takes steps to strengthen capital management, improve dividend payout and its consistency, and increase investor relations activities, with a view to enhance market recognition of the valuation of Great Eastern’s shares. While the GEH Group is a significant part of the OCBC group, the larger part of the OCBC group’s business is in banking."
Analysts believe that one way to narrow the discount between GEH's share price and its embedded value per share would be for GEH to have more liquidity than its less than 12% free float currently.
