KUALA LUMPUR: The current management tussle in South Malaysia Industries Bhd (SMI) shows no signs of abating, with the board appointing Leow Thang Fong as chief executive officer (CEO) even after shareholders voted against his continuation as a director of the company during the annual general meeting (AGM) on March 27, 2024.
This move will likely fuel the company’s ongoing management turmoil, raising questions about corporate governance and shareholder influence in critical decision-making processes.
During the AGM, a majority, or 51.2 per cent of shareholders, expressed their lack of confidence in Leow’s leadership by voting against him.
Despite the decisive vote, SMI’s board reinstated Leow in a more senior executive position, prompting concerns about the board’s regard for shareholder democracy.
A major shareholder of SMI, wishing to remain anonymous, expressed deep worry about Leow’s recent appointment as CEO, especially since the majority of shareholders rejected him at the AGM.
“This move not only undermines the shareholders’ vote but also raises serious questions about the board’s commitment to transparency and good governance.
“We believe in the importance of aligning leadership with shareholder interests and are currently evaluating our options to ensure that the company adheres to the highest standards of corporate governance,” the shareholder told The Exchange Asia.
Though lawful, the decision raises questions about conventional corporate governance norms and could worry investors about the integrity of governance practices within SMI, the company said in a statement.
Further, the decision can potentially undermine investor confidence, possibly discouraging foreign investment in Malaysia, as investors highly prioritise transparency and robust governance in market operations.
To recap the background, Honsin Apparel Sdn Bhd (HASB), a subsidiary of Techbase Industries Bhd, owns a 7.5 per cent stake in SMI and has actively advocated for governance reforms within the company.
HASB has been engaged in continuous legal battles with SMI, seeking to instigate improvements in governance and management practices.
In October 2023, HASB secured a legal victory allowing them to convene an extraordinary general meeting (EGM).
However, SMI thwarted this effort by obtaining a judicial stay, delaying the EGM.
These recent developments highlight a more significant concern regarding the possible exploitation of shareholder rights by current directors within SMI.
SMI’s response to this appointment’s aftermath has the potential to establish significant precedents for corporate governance norms in Malaysia.
Investors and governance experts are closely monitoring this situation to see its implications.
On March 21, SMI announced its decision to postpone plans for directorial changes following a significant shareholder’s move to seek a temporary court order.
According to an exchange filing, SMI promptly convened an emergency board meeting on March 20 after receiving a writ of summons and notice of application for an interim injunction from Mah Sau Cheong.
Legal advisors cautioned the company against potential contempt of court if it were to act before a court ruling.
“The board, in alignment with the advice from legal counsel, has determined it prudent for SMI to maintain its current state and await the court’s decision before proceeding with the proposed changes,” SMI said in a statement.
Mah has applied for a temporary court injunction to block SMI from presenting resolutions by HASB and Chong Fu Shen at its annual general meeting on March 27 and at any subsequent general meetings.
Furthermore, he has requested that Datuk Au Yee Boon and any affiliated entities refrain from initiating resolutions to dismiss or appoint new directors until the lawsuit is fully and conclusively resolved.
HASB has previously served notice to SMI, indicating its desire to nominate Hong Zheng Hong and Tan Eng Gooi as directors at the upcoming AGM on March 27.
However, SMI announced that it opposes this proposal.
In addition to HASB, another minor shareholder, Chong Fu Shen, has expressed a similar intention to nominate himself, Lum U-Jun, Chong Fu Chih, and Loo Choo Hong as directors.
Asian PAC Holdings Bhd (APH) is SMI’s largest shareholder, holding a direct stake of 2.25 per cent and an indirect shareholding of 9.3 per cent.
Mah, on the other hand, holds the largest share in APH, with a 32 per cent stake and a direct interest of 7.65 per cent in SMI.
HASB’s notice of intent comes amidst a series of ongoing legal disputes with SMI, stemming from its joint efforts with HIQ Media (M) Sdn Bhd to gain control of the listed company’s boardroom since February last year.
