Reflections on Hong Fok’s 2026 AGM

I attended Hong Fok’s AGM held on 30 April 2026 as a shareholder. It was the first Hong Fok AGM I have attended, having bought 500 shares a few months ago with the intention of attending its AGM.

Hong Fok has been on the radar screen of minority investors for many years. There was a minority shareholders’ revolt, with some minority shareholders setting up a website. Their anger then was similar to the anger and unhappiness I witnessed at the AGM – years of underperformance with its shares trading well below net asset value, low dividends, and excessive remuneration for the executive directors (EDs) and other employees who are part of the Cheong family, the controlling shareholder. Back then, I recall there was no dividend paid at all – and eventually, a one-cent dividend a year started to be paid, although excessive remuneration continued.

When I attended this AGM, my intention was to ask questions about the amount of remuneration of the EDs and other related family members, their remuneration polices, and disclosures relating to remuneration.

I prepared two set of questions which I have reproduced below:

Question 1:

It was disclosed that the variable component of the remuneration of the EDs is primarily in the form of profit-sharing incentives based on a percentage of the average of the group’s past three years’ profit attributable to the owners of the company.

• Are these percentages fixed for each ED each year?
• If so, how does this reconcile to the company’s statement that the variable component is based on KPIs allocated to each individual and that factors assessed include the individual’s contribution to risk management of the group, and that KPIs include group’s profitability and other financial and operational indicators?
• How is profit-sharing linked to the roles and responsibilities of each ED? Is that a reward for ownership or for management?

Question 2:

The 2018 Code which forms part of the listing rules, state that explanations for variations from Code Provisions should be comprehensive and meaningful.

• Can the board explain how a statement that the company wishes to disclose the remuneration of family members in bands of $250k instead of $100k, its view that the intent of Principle 8 was met, that they are KMP and therefore bands of $250k are sufficient, and that more detailed disclosure would be prejudicial to the company’s interests and hamper its ability to retain and nurture the group’s talent pool, meet the requirement for explanations to be comprehensive and meaningful?
• How is disclosure in bands of $100k prejudicial to the company’s interest and hamper its ability to retain and nurture the group’s talent pool?

One shareholder and my colleague from Corporate Monitor Limited (CML), who attended as a proxy, also asked questions about remuneration which partly covered the questions I had.

However, it was the answer of the non-independent non-executive Chairman, Mr Adrian Chan, that caused me to change my line of questioning. In trying to justify the high ED remuneration, he said that Hong Fok benchmarked total staff costs to peer companies – some 40 plus companies apparently – and that based on this, the remuneration was in line with peers. He said that this was something not taken into consideration by CML in its report.

Well, if the company did not disclose this, how is CML supposed to take this into consideration? What the company said in the remuneration section of its Corporate Governance Statement is this: “In reviewing the remuneration of executive Directors, the Remuneration Committee has also taken into consideration how executive Directors managed the overall staff costs of the Group.”

It is unclear which 40 plus companies were chosen as peers – I hope they did not include companies like DBS or Walmart. The remuneration consultant from HR Guru, who was present and seated with the directors, did not offer any details.  I would have loved to learn how gurus set remuneration.

I have never heard of companies benchmarking total staff costs when setting remuneration of EDs. I pointed out the danger. If total staff costs are in line with peers but the EDs and family members are excessively paid, it may mean they are underinvesting in or underpaying professional staff, which would make it difficult to attract talent from outside the family.

I then pointed out that the three EDs have different roles, but the company had said that the variable bonus for each of them was based on profit-sharing. This would imply that profit is the only KPI for all of them, including the ED who has a COO role.

I then asked about the family member who is a Senior Vice President of Corporate Services, who was paid $1m to $1.25m and the two other family members who were paid $0.5m to $0.75m. I asked how much does the board think a professional manager holding those roles for a company which is comparable to Hong Fok would be paid. This goes back to my question: are they paid as managers or owners? As this is executive remuneration, it should be payment for services as managers.

The Board did not respond to my points. The Chairman simply said I made good points and they will take it into account.

This prompted a very angry shareholder to lash out at the Board, saying that he has heard the same line every year.

Let’s see if next year will truly be different. I hope to be there again and already blocking my diary for the last few days of April 2027.