Note: This post was updated on 31 December 2021 at 4.45 pm and then further updated at 7 pm.
Last night, ASTI Holdings posted a “clarification announcement” in response to my earlier post about the payment made to the Executive Chairman and CEO, Dato’ Michael Loh Soon Gnee, for the termination of his employment as CEO.
Among other issues, I asked the following: “First, why was Dato’ Loh given a termination payment, which the company said he was contractually entitled to, when the company’s latest annual report for FY2020 said that there are no termination, retirement or post-employment benefits provided for in the employment contracts with the directors, CEO or top five key management personnel. Second, is the company correct in claiming that this payment does not require shareholder approval under section 168(1A) of the Companies Act, since the amount of nearly S$1.4 million is more than the total remuneration of just under S$1.3 million which the company disclosed was paid to Dato’ Loh for FY2020? Section 168(1A) says that shareholder approval is required if a termination payment exceeds the total emoluments of the director for the year immediately preceding his termination of employment.”
The company now said that it had previously only paid Dato’ Loh one month of AWS although his employment contract clearly stipulated that he is entitled to two months of AWS. It added: “As a result of this clerical error, the total remuneration paid to Dato’ Loh was in accordance with the remuneration table in the Company’s annual report for the year ended 31 December 2020 which is stated to be $1,294,000. After this error was noted, the Company paid the full AWS amount due to Dato’ Loh such that the aggregate amount actually paid to Dato’ Loh is S$1,378,270 (when his two months of AWS is properly factored in).
According to the Ministry of Manpower (MOM), the AWS is also called the “13th month payment”. In Dato’ Loh’s case, there is also a “14th month payment” so maybe MOM needs to revise its description of the AWS. MOM also says the AWS is not compulsory but employers are encouraged to give their employees AWS to reward them for contributing to the company’s performance. ASTI has been struggling for some years.
The AWS is computed based on the monthly salary. Therefore, a one-month AWS should be equivalent to one month of Dato’ Loh’s salary. The difference between the S$1,294,000 which the company disclosed in the FY2020 annual report and the S$1,378,270 termination payment, or S$84,270, is one extra month of AWS, which should also be equal to one month salary. If we multiply S$84,270 by 14 months (12 months of salary and two months of AWS), we get S$1,179,780, not S$1,378,270. The remuneration table in the FY2020 annual report also states that his total remuneration comprises 97% fixed salary, 1% fees, 0% bonus and 2% benefits. If he did not receive a bonus, how do we account for the difference? (if we add the 1% fees and 2% benefits, his total remuneration should be about S$1,216,270, if we use S$84,270 as his monthly salary). Did the company omit to disclose a bonus percentage due to another “clerical error”, or does it have a different way of calculating the AWS, or was it not exactly a one month AWS that was omitted?
)Alternatively, if we start with S$1,294,000 disclosed in the FY2020 annual report and accept the company’s latest statement that it was 12 months salary plus one month AWS (or equivalent to 13 months salary), adding another month of salary as AWS would bring his total remuneration close to the S$1,378,270 which the company said it actually paid him. In this case, his monthly salary is about S$99,538.
It would seem there is a need for the company to clarify the clarification.
This is not the first time the company has faced scrutiny over how remuneration for Dato’ Loh is determined. In FY2018, it paid him a S$8 million “bonus and management incentive”, which was later suddenly revised to S$2.182 million. There was no explanation for the basis of the original S$8 million paid to him or the final amount of S$2.182 million.
Regarding the discrepancy between the statement in the FY2020 annual report which said “there are no termination, retirement and post-employment benefits provided for in the employment contracts with the directors, CEO or top five key management personnel”, and the company now saying that Dato’ Loh is contractually entitled to a termination payment of S$2,040,750, the response said there was “an inadvertent oversight”. It said that in fact “Dato’ Loh’s employment contract dated 8 August 2020 does contain a clause on termination benefits”.
The company had originally announced that Dato’ Loh was to resign as executive chairman and CEO with effect from 1 April 2020. However, on 29 March 2020, it announced that the board could not find someone as talented as him after a one-year search and asked him to stay on. The company then agreed to add a termination clause which entitled him to more than S$2 million in termination payment.
Based on a monthly salary of S$99,538, his contractual entitlement on termination is equivalent to about 20 months of salary. If we use the lower monthly salary of S$84,270, it is about 24 months.
Why did the board agree to add such a generous termination entitlement? Even in the best of times, it is arguably excessive. When the company is struggling financially, it is indefensible. It is also unacceptable that the corporate governance report dated 14 May 2021 disclosed that he was not entitled to any termination payment. If it was disclosed, shareholders could have questioned the board at the AGM held on 31 May 2021.
“Clerical error”, “inadvertent oversight”, “administrative inadvertence”, “honest mistake” and other excuses for wrong disclosures have entered the lexicon of our disclosure-based regime, and making a mockery of it. It is long overdue for regulators to hold companies and directors to account for disclosure lapses.
