Ethics and Corporate Governance

• The rights and equitable treatment of shareholders and key

ownership functions

•Case Study - C.K. Tang : The Fight Towards Provatisation

ANGGOTA KELOMPOK 2:
Andi Setiawan (1706088082)
Fajar Andi S.P (1706997256)
KevinYoditama Putra (1706088750)
R. Evayanthy Banjarnahor (1706997786)
Sarah Shahnaz Ilma (1706089160)
Wilda Irliani (1706998044)
Agenda
 Theory Background
 Shareholders and Stakeholders
 Family-owned firms
 Case Synopsis
 Case Question
 Question and Answer
What is Good Corporate Governance?

Corporate governance is "the system by which companie

s are directed and controlled"
(Cadbury Committee, 1992)

It involves a set of
relationships between
a company’s management, its board,
its shareholders and other stakeholders
What is Stakeholder?

A person, group, or
organization that ha
s direct or indirect st
ake in an organizati
on because they can
affect or be affected
by the organization's
actions, objectives, a
nd policies.
Stakeholder Type

Secondary
Primary Stakeholder
Stakeholder Key Stakeholder
(Main)
(Supporter)

• People that • Is stakeholder • That has legal in

actively that has no the decision
participated directly business making
with the due to a project,
company and but they
directly work concern so they
there. have impact.
What is Shareholder ?
A shareholder or stockholder
is an individual or institution, including a corporation that
legally owns any part of a share of stock in a public or pri
vate corporation. Shareholders own the stock, but not th
e corporation itself.
 Type of Stock

• Common Stakeholder
Temporary dividend Stock Ownership

• Preferred Stakeholder • Majority Shareholder

Fixed dividend. -Own more than 50% of stock.
-Exerts complete control over the
company by being able to replace
the board of directors and the
management.
-Have a bigger voting rights.

• Minority Shareholder
-Own less than 50% of stock.
-Has less authority than majority
shareholder.
-Have less voting right.
Shareholder & Stakeholder
Interests
Companies should take account of the views of
various stakeholders in addition to those of sha
reholders.

Whilst the corporate objective is generally to ma

intain or enhance shareholder value, the impac
t of the company’s activities on its other stakeh
olders must be taken into account when decidi
ng the strategy to be developed for achieving th
e corporate objective.

By taking account of the views and interests of it

s stakeholders, the company should be able to a
chieve its objectives with integrity and help to
achieve sustainability of its long-term operatio
ns.
The OECD Principles of
Corporate Governance
1. Ensuring the basis for an effective corporate governance
framework
2. The rights of shareholders and key ownership functions
3. The equitable treatment of shareholders
4. The role of stakeholders in corporate governance
5. Disclosure and transparency
6. The responsibilities of the board

The corporate governance framework should ensure the strategic g

uidance of the company, the effective monitoring of management
by the board, and the board’s accountability to the company and t
he shareholders.
The OECD Principles of Corporate
Governance
Principle II: The rights of shareholders and key ownership
functions

“The corporate governance framework should protect and facilitate the exercise
of shareholder’s rights and ensure the equitable treatment of all shareholders,
including minority and foreign shareholders. All shareholders should have
the opportunity to obtain effective redress for violation of their rights”

Principle II (A) : Basic shareholder rights should include the

right to:
1) secure methods of ownership registration;
2) convey or transfer shares;
3) obtain relevant and material information on the corporation on a timely and
regular basis;
4) participate and vote in general shareholder meetings;
5) elect and remove members of the board; and
6) share in the profits of the corporation
The OECD Principles of Corporate
Governance
Principle II: The rights of shareholders and key ownership
functions
Principle II (B) : Shareholders should be sufficiently informed about,
and have the right to approve or participate in, decisions
concerning fundamental corporate changes such as:

1) amendments to the statutes, or articles of incorporation or similar governing

documents of the company;
2) the authorization of additional shares; and
3) extraordinary transactions, including the transfer of all or substantially all assets,
that in effect result in the sale of the company.
The OECD Principles of Corporate
Governance
Principle IV: The Role of Stakeholders in Corporate
Governance

“The corporate governance framework should recognise the rights of

stakeholders established by law or through mutual agreements and
encourage active co-operation between corporations and stakeholders in
creating wealth, jobs, and the sustainability of financially sound enterprises”

Principle IV (A) : The rights of stakeholders that are established by law or through
mutual agreements are to be respected.
Principle IV (E) : Stakeholders, including individual employees and their
representative bodies, should be able to freely communicate their concerns about
illegal or unethical practices to the board and to the competent public authorities and
their rights should not be compromised for doing this.
Family-Owned Firms

Business Family

To be successful as both the company and the family, a family

business must meet two intertwined challenges: achieving strong
business performance and keeping the family committed to be
capable of carrying on as the owner
Corporate Governance for
Family Business
Corporate governance creates a
solid organizational structure
that clarifies roles, reporting lines
and delegation of responsibility. .
It also draws the line between
ownership and management and
separate policy direction from
the day-to-day running of the
company. Also successful family
businesses are the result of years
of hard work and dedication and
there is a need to ensure that
the leadership transition does
not disrupt the company’s
growth
Case Study - C.K. Tang : The Fight
Towards Privatisation
Case Synopsis

 Case Question

 Question and Answer

 Case Synopsis

Founded by Tang
Choon Keng in 19
32
specializes within
Singapore’s retail
market

In 1975, was listed

on the Singapore
Exchange
 2006 2009
2003

* Scheme of * Unconditional cash * Voluntary delisting

arrangement offer
* Privatisation was
* The offer price was * Undervaluational passed with 96,25% of
too low of the commercial votes in favour of the
property Tangs Plaza proposal
Case Question.1
Q : The underlying causes of possibility of
divergence of interests between the controlling
and the minority shareholders.

• Political and economical interest

• Controversy in buyouts

• Future Land and Building Valuation

Case Question.2
Q : Should independent directors be primarily
concerned with the interest of the minority
shareholders?

Yes, to broaden the considerations

• Minority Shareholders’ rights and roles

• Independent Directors’ Transparency

Case Question.3
Q:
Evaluate independence CK Tang’s board during 3rd privatisation
attempt. Do you think affected the action ?

Doubtful because he was personally related to Tang Wee Sung, and

also workmate since 1999 to 2006, and it will also affect the decisi
on but the main issue is doubtful among shareholder about redevelo
pment plans for Tangs Plaza after its privatisation
Case Question.4

Q:
Do you believe that the basis of valuation was fair ?

Rule in Singapore in indicated that all govern take over activity involving
Public companies must be valued at the open market value for its existing
use, should be estimated by independence valuation company, but in this
case show that minority sharehoulder doubtful of PWC’s result

Need alternatife valuation company to asses value in same time, to

compare validation and decreasing doubtful among shareholders
Case Question.4
Q : Improvement to protect minority interest.
• Special rights to call for Extraordinary Shareholder Mee
ting.

• Clear guideline on the right of minority shareholders in

case of have a disagreement with majority shareholder
on corporate actions.

• Minimum threshold for shares valuation (market value

or net book value) in case of buy back.

• Clear guideline for market valuation (last closing price

or average historical price).
Case Question.5
Q : Improvement to protect minority interest.
• Special rights to call for Extraordinary Shareholder Mee
ting.

• Clear guideline on the right of minority shareholders in

case of have a disagreement with majority shareholder
on corporate actions.

• Minimum threshold for shares valuation (market value

or net book value) in case of buy back.

• Clear guideline for market valuation (last closing price

or average historical price).
Case Question.6
Q : : Explain Pro & Con for each scheme to
both shareholders
Scheme 1 : 35% above last 5-day closing price or equal to 80% of net
tangible asset value.
Majority shareholders
Pro:
• Higher Company valuation
Cons:
• Diluted ownership as Tang’s ownership will be higher.

Minority shareholders
Pro :
• High return for short run as the negotiation fails, the stock price may tend t
o be higher.
Cons:
• Valuation based on the short term price (last 5 days closing price) which ma
y affected by seasonal trading pattern.
• Less market liquidity for stock.
Case Question.6 (cont)
Q : : Explain Pro & Con for each scheme to
both shareholders
Scheme 2 : 16.1% above last day closing price or equal to 9.4% above
net assets by acquisition Kerith holdings

Majority shareholders
Pro:
• Higher Company valuation (9.4% above net asset)
Cons:
• Diluted ownership as Tang’s ownership will be higher.

Minority shareholders
Pro :
• High return for short run as the negotiation fails, the stock price may tend to
be higher.
Cons:
• Valuation based on the short term price which may affected by seasonal
trading pattern.
• Less market liquidity for stock.
Case Question.6 (cont)
Q : : Explain Pro & Con for each scheme to
both shareholders
Scheme 3 : Voluntary delisting proposal by Tang’s investment Company, 22% above
last day trading price or equal to 79% of net asset value

Majority shareholders
Pro:
• Higher ownership percentage over the Company
Cons:
• Lower market valuation

Minority shareholders
Pro :
• High return for short run as the negotiation fails, the stock price may tend to be
higher.
Cons:
• Valuation based on the short term price which may affected by seasonal trading
pattern.
• Less market liquidity for stock.
Conclusion and Recommendations

- Owner vs BOD’s Point of Views

- Integrity and Proper

Application of Corporate
Governance Guidelines
References
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THANK YOU