Sincere payments lambasted
THE Institute of Chartered Secretaries has stepped into the Sincere Co pay scandal, calling for the company directors' fitness to lead a listed company in Hong Kong to be examined.
The professional body suggests that under Hong Kong law the controversial payment to directors of a total $115 million may constitute a sham transaction and be prejudicial to the interests of the shareholders.
In a strongly worded editorial article to be published in the September issue of its magazine Company Secretary, the organisation suggests shareholders have the right to ask the courts to revoke the payments.
Sincere's annual report last week revealed that directors had paid themselves $115 million, including fees, salaries, bonuses and other perks, in the year to February 28.
That was 2.5 times the company's net profit of $46.66 million.
The institute's article on the payment says: ''News of the $115 million emoluments paid to the directors of the Sincere group is beyond bold - it is obscene.
''Conduct of this nature shows such blatant disregard for non-family shareholders that it is tempting to suggest that it is inconsistent with what is expected of the management of a listed company.'' The institute suggests that Section 168A of the Hong Kong Companies Ordinance could be used ''to determine that remuneration paid to directors was in all the circumstances of the company excessive and unfairly prejudicial to a petitioning member.
''All it takes is one shareholder to make a complaint . . .'' ''If a company's directors wish to retain all the trappings of listed status then there must be no doubt that they understand and accept their duty to act in the best interests of all shareholders and to treat minorities fairly, honourably and responsibly.'' Last week the Institute of Directors and a number of accountancy companies criticised the Sincere payments.
On Saturday the stock exchange confirmed that it was questioning the company about the money paid.
The company's 1992-93 net profit of $46.66 million compared with an attributable profit of $1.12 billion a year earlier.
The 1991-2 profit was swelled by an extraordinary item from the $1.08 billion sale of the Sincere Building in Central.
Profit attributable to shareholders in 1990-91 was $269 million.
According to Sincere's latest annual report, $48 million was paid to the board, against $22 million in 1991-92.
There were also bonus payments of $66.6 million to certain directors last year, against $36 million a year earlier. This money was charged as costs and expenses against the extraordinary gain.
There are five executive directors and three non-executive directors.
The executive directors are Walter Ma, Philip Ma, John Ma, Ma Siu-chung and Selwyn Mar, a former Hong Kong Society of Accountants president.
Some $17.7 million of the bonus payments was capitalised as deferred expenditure to be amortised over five years.
The institute's editorial on Sincere says: ''Few of us wish to deny successful entrepreneurs the wish to remain in control when they allow siu yan mat [little people] like you and I to share in their success.
''But with power comes responsibility, and that is what went missing when Sincere presented their year-end report and accounts.'' Increasing disclosure is not the answer, says the institute, as the activities of the group were fully disclosed for the year in question.