By Mak Yuen Teen

Over the years, I have written or commented about many Singapore-listed companies which are controlled and managed by families and founders, and they are often negative. However, family- and founder-managed companies are not always poor in terms of corporate governance and management, and Tai Sin Electric, a family-managed company listed on SGX, is a positive example.

Tai Sin is one of those quiet achievers that just seems to go about its business. I have not seen them mentioned much in corporate governance, transparency or sustainability awards. Unlike many other companies, you do not see a list of awards or accolades mentioned in their annual reports. But as Javier Bardem, who won the Best Supporting Actor award in 2008 for No Country for Old Men said: “An award doesn’t necessarily make you a better actor.” Some companies and individuals who win corporate awards are just good actors. But I digress.

Tai Sin came to my attention some years ago when a relative told me that she had lost money in many SGX-listed companies but Tai Sin had been good and consistently paying dividends. Yesterday, someone pointed out to me that Tai Sin seems to stand apart from many other family companies. So I decided to take a closer look.

Tai Sin was founded in 1980 as a cable manufacturing business and has evolved into an integrated industrial group. It listed on Catalist (formerly known as SESDAQ) in 1998 and transferred to the Main Board in 2005.

For the year ended 30 June 2022, its gross revenue increased by 27.01% to $379.05 million, profit before tax increased by 27.97% to $27.28 million, and earnings per share increased by 27.47% to 4.78 cents. Its share price closed at S$0.395 on 19 October 2022, with a market capitalisation of $181.804 million.

Family- and founder-managed companies may not tick all the boxes in a corporate governance code. What is more important is whether they are fair to minority shareholders. A good way to evaluate this is to look at three areas: how and how much family members are paid and whether this is properly disclosed;  how prevalent are interested person/related party transactions involving family members; and how much dividends are paid to shareholders.

Tai Sin is controlled by the Lim family, with several family members involved in the board and management. The chairman of the five-member board of directors is Bobby Lim Chye Huat, who is a non-executive non-independent director. His son, Lim Boon Hock Bernard, is CEO and Executive Director. The other three directors are independent directors (IDs), and they are Soon Boon Siong, Lee Fang Wen and Remy Yeo Ah Kiang. Soon is the lead independent director and has served on the board for 10 years, while Lee and Yeo have served for 7 years and 4 years respectively.

Tai Sin’s latest annual report for the year ended 30 June 2022 shows the exact remuneration of all five directors. Bobby Lim was paid $72,000 while Bernard Lim was paid $1.423 million, with base salary making up 35% of his total remuneration and bonus, other variable components and benefits making up the remaining 65%.  Bernard Lim’s bonus and other variable component comprises a performance bonus and annual profit sharing incentive bonus which is dependent on the group’s performance for the financial year. Lead ID Soon was paid $71,000 while Lee and Yeo were each paid $57,000.

In addition to Bobby Lim and Bernard Lim, there are five other family members employed in the company. Two of them, Louis Lim Chai Lai and Chia Ah Heng, are among the top five key management personnel (KMP) and their remuneration is disclosed in a band of “$300,000 to below $350,000”.  The disclosure of remuneration of KMP in bands of $50,000 goes far beyond the Code’s recommendation of bands of $250,000. The aggregate remuneration paid to the top five KMP was disclosed, and amounted to $1.79 million.

Tai Sin also included a table showing all the immediate family members of the chairman, CEO and substantial shareholders involved in the company whose remuneration exceeds $100,000. The table, reproduced below, provides the most extensive disclosure of family relationships I have seen in an annual report in Singapore. This table discloses that one other family member was paid between $150,000 to below $200,000 and two other family members were each paid between $100,000 to below $150,000. Even though the 2018 Code of Corporate Governance widened the band disclosure for remuneration of family members to $100,000 from $50,000 in the 2012 Code, Tai Sin continues to disclose in a band of $50,000.

The same transparency was practised in the past, based on the annual reports going back to FY2015. What I also like is that in the FY ended 30 June 2020, Bernard Lim voluntarily waived his FY2020 profit sharing entitlement and proposed to receive a lower quantum as bonus, with the onset of Covid. That year, turnover and profitability had declined. However, it maintained its dividend per share at 2.25 cents.

While Tai Sin does not have a stated dividend policy, it has paid dividends to shareholders every year since its listing on SGX. A stated dividend policy is good but doing it is better.

In terms of interested person transactions, Tai Sin does not have a general mandate for such transactions and based on its annual reports from FY2015 to FY2022, there were no interested person transactions (excluding transactions less than $100,000) entered into by the group.

There are some related party transactions with companies in which members of key management have interests which are disclosed in the notes to the accounts but they are not excessive.

As controlling shareholders of the company, the Lim family could have used their power to extract maximum benefits for themselves from the company and disregarded the interests of minority shareholders, like controlling shareholders in many other companies do.  But it has not done so.

Tai Sin lists three core values, the first of which is integrity and said: “We treasure loyalty, uphold honesty, and practise good business ethics”. In this case, it seems to be living up to this core value and I hope it continues to do so.

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The author is not a shareholder of Tai Sin.