A dramatic conflict has erupted within property giant City Developments Ltd (CDL), as tensions between executive chairman Kwek Leng Beng and his son, group CEO Sherman Kwek, come to the forefront. The power struggle within the Kwek-family controlled company has been simmering for years, culminating in a dramatic showdown.

In a statement issued on Wednesday (Feb 26), Kwek Leng Beng, 84, announced that he had filed court papers to address what he described as an "attempted coup" by his son Sherman Kwek, Philip Lee, Wong Ai Ai, and a group of directors acting with them. The elder Kwek accused the group of trying to consolidate control of the board and the company, bypassing corporate governance principles.

Following a late-night court hearing, Kwek Leng Beng declared that the alleged lapses in corporate governance at CDL and its subsidiaries had been halted. He stated that two new directors, who were irregularly and hastily appointed on Feb 7, had undertaken not to exercise any powers until further notice from the court. Additionally, the Nominating and Remuneration Committee was suspended from taking any further actions.

Kwek Leng Beng emphasized his responsibility to CDL, its shareholders, and its future, stating that he prioritized the interests of all shareholders, not just his family. He acknowledged the difficulty of firing his son, noting that while business mistakes are understandable, circumventing corporate governance laws is unacceptable.

In response, Sherman Kwek, 49, expressed his disappointment in a statement, arguing that the chairman and a minority of the CDL board had taken extreme actions over a disagreement about the board's size and composition. He maintained that the recent changes were never intended to oust the chairman.

The elder Kwek cited several instances where he believed Sherman Kwek's decisions had put City Developments Ltd in a precarious position, including the group's investment in China developer Sincere Property Group, which resulted in a S$1.9 billion loss in 2020, poor investment decisions in the UK property market, and the consistent underperformance of CDL’s share price since Sherman Kwek assumed leadership in 2018.

The power struggle reached a critical point with the sudden cancellation of CDL's FY2024 results briefing on Feb 26 after the company called for a trading halt. Despite the internal turmoil, CDL assured stakeholders that business operations remained fully functional and unaffected, with Sherman Kwek continuing as group CEO until further notice.

If the legal action by the elder Kwek is successful, Mr Kwek Eik Sheng, currently group chief operating officer, will serve as interim group CEO should Mr Sherman Kwek be removed. 

Mr Kwek Eik Sheng is the son of the late Kwek Leng Joo. Therefore, he is the nephew of Mr Kwek Leng Beng.

This high-stakes family feud underscores the challenges of balancing corporate governance with familial loyalty, as the Kweks navigate the complexities of managing one of Singapore's leading property companies.

• Founding of Hong Leong Group: The Kwek family's business empire began with the founding of Hong Leong Group by Kwek Hong Png in 1941. The conglomerate has core businesses in property development, hotels, financial services, and trade and industry.

• Acquisition of CDL: In 1972, Hong Leong Group acquired a controlling stake in City Developments Ltd (CDL), which was struggling financially at the time. Under the leadership of Kwek Leng Beng, CDL turned profitable through strategic diversification into investment properties.

• Expansion into Hospitality: CDL entered the hospitality market with a hotel-buying spree, starting with the acquisition of King's Hotel (now Copthorne King's Hotel Singapore) in 1980. In 1995, CDL acquired the iconic Plaza Hotel New York from Donald Trump and purchased the Copthorne Hotel chain, adding more hotels in the UK, Germany, and France.

• Key Family Members:

  • Kwek Leng Beng: Executive chairman of Hong Leong Group and CDL. He joined Hong Leong Finance as general manager and director in 1967 and became CDL's managing director in 1974. He succeeded his father as executive chairman of Hong Leong Group by 1990.

  • Sherman Kwek: Son of Kwek Leng Beng and group CEO of CDL. He joined CDL in 2010 and has held senior management roles, including deputy CEO and chief investment officer.

  • Kwek Leng Joo: Brother of Kwek Leng Beng, who joined CDL as a director in 1980 and served as its deputy chairman until his death in 2015.

  • Quek Leng Chan: Cousin of Kwek Leng Beng, who runs the Hong Leong Group in Malaysia.

• Notable Achievements:

  • CDL's transformation into one of Singapore's leading property players.

  • The acquisition of over 150 hotels worldwide.

  • Kwek Leng Beng's reputation for acquiring valuable assets at bargain prices, such as the Plaza Hotel deal with Saudi prince Al Waleed bin Talal Al Saud.

• Challenges and Controversies:

  • The group's investment in China developer Sincere Property Group, which led to a S$1.9 billion loss in 2020.

  • Poor investment decisions in the UK property market, contributing to significant financial losses.

  • The consistent underperformance of CDL's share price since Sherman Kwek assumed leadership in 2018.

• City Development (CDL) Share Price Action

  • When Sherman Kwek began his tenure as group CEO in January 2018, CDL's share price was around S$12. By Tuesday, shares had closed at S$5.12. The company has seen its shares decline by nearly 60% since the start of 2018.

  • Investors do not like uncertainties. Having a clear succession plan reassures shareholders that the company is prepared for leadership changes, which can positively influence the company's stock price and overall market perception.