Assignment #2 Name: M Fahad Batavia CLASS: BBA 8 (SMCHS) ID: 11184 FACULTY: Sir Muhammad Sharif SUBJECT: Fundamentals of Corporate Governance

ASSIGNMENT #2
NAME: M FAHAD BATAVIA
CLASS: BBA 8 (Smchs)
ID: 11184
FACULTY: Sir Muhammad Sharif
SUBJECT: Fundamentals of corporate governance

Discussion Questions
1. In cases of companies where there are controlling shareholders, explain why

the interest of controlling and minority shareholders may diverge, using the CK
Tang case as an example.
ANS: Judging from the example of case C. K. Tang, sometimes there is a misuse of control from
majority shareholder against minority shareholders. This can happen because there are
personal political interests of some of the majority shareholders (agents) that are detrimental
minority shareholders (principal). In the case of C.K. Tang, majority shareholder represented by
the board of directors, decided to privatize the company with how to buy all existing shares
(buyout). Controversy arises when there is one asset company, namely Tangs Plaza, which is
considered to be too low by some holders of minority stock. This of course is detrimental to the
shareholders. From the results of the analysis PwC, Tangs Plaza is worth $ 340 million. This price
is far below the price of other buildings surrounding.
Which is also considered by minority shareholders is potential the rebuilding of Tangs Plaza is
predicted to reach a very high value. However, the legal board of directors said that there was
no need for an assessment of development return assets in the future. This of course caused
disappointment for the shareholder's minority stock.
2. Should independent directors be primarily concerned with the interests of

the minority shareholders?
ANS: Interests between majority shareholders and minority shareholders in a limited liability
company often conflict with each other. Minority shareholders are not infrequently used only
as a complement in a company. In the decision-making mechanism in the company can be
ascertained minority shareholders will always lose compared to majority shareholders, because
the decision-making pattern is based on the percentage of shares owned. Situation this will be
even worse if the majority of shareholders use the opportunity this is to control the company
based on its interests and not heed it the interests of minority shareholders. In this case, the
independent director has a role that is very important to protect and be accountable to
shareholders minority. To the shareholders, the independent director must provide
transparency concerning disclosure of company performance and upholding justice in resolving
conflicts that may occur.
3. Evaluate the independence of C.K. Tang’s board during the third privatization
attempt. Do you think this affected the actions of the board during the
privatization process?
ANS: There is an issue that the executive C.K. Tangs are not independent, because of the CEO
this company; Foo Tiang Sooi has a personal relationship with Tang Wee Sung, the holder
majority share of this company. Foo worked for Tang from 1999 to 2006 and both are friends at
school. On the other hand Foo added that he too has a relationship with the shareholders who
present the facts. Had been it is proven that the two facts are not relevant. So in our opinion
independence, C.K Tangs's executive ranks on the third attempt of privatization were not
influenced by the second that fact. The legal consultant and chief shareholder also decided to
refuse the objection. So that the voting is still being done and proven through company
privatization agreement with 96.25% of the vote.
4. Do you believe that the basis of valuation was fair? Explain.

ANS: In our opinion, the basis for valuing Tangs Plaza property is unfair for shareholders
minority. That is because, property valuation reports have considered value Tang Plaza's
potential redevelopment makes the property value to $ 340 far from other properties in the
same environment and also quite far from the results of the valuation of the property
conducted by a minority shareholder of $ 400. Council legal counsel, Yeo Wee Kiong, also said
that putting the valuation of rebuilding the property in the report assessment is not required by
law. Of course the basis for the assessment will be detrimental to minority shareholders.
5. With regards to the privatization episode, suggest improvements that would

help protect minority shareholders in the future.
ANS: According to the Organization for Economic Co-operation and Development (OEDC) there
are five important elements in Corporate Governance, namely transparency, independence,
accountability, responsibility and fairness. Corporate Governance Principles developed by OEDC
intends to help members and non-members in the effort to assess and improve the legal,
institutional and regulatory framework for Corporate Governance in their countries, and
provide instructions and proposals for capital markets, investors, corporations, and other
parties who have a role in developing GCG (Good Corporate Governance).
One of the principles according to the OECD cited by Iman S. Tunggal and Amin W. Tunggal
(2002: 9), which relates to the majority shareholder is (equitable treatment of shareholders).
Principle fairness (equality) is the equality of treatment of companies against parties who
interested in the criteria and proportions that should be. In this case it is emphasized so that
the parties concerned with the company are protected from fraud as well as abuse of authority
by insiders. This principle regulates that a company must establish company rules to be able to
protect the interests rather than shareholders, especially minority shareholders, and this
principle also requires the establishment of policies so that they are protected from fraud
committed by insiders or originating from within (self-dealing).
Therefore the roles and responsibilities of commissioners and management are very necessary
and this principle also puts forward the fairness in any information that is material and full
disclosure. Fairness includes the clarity of rights shareholders to protect the interests of
shareholders. The company's performance will be more stable because shareholders know in
detail all company information, both regarding the GMS (General Management System), the
Board of Commissioners and Directors, the company's capital structure, dividend Policy
Company, and others. Therefore, to protect minority shareholders in the future ahead,
companies must apply the principles of corporate governance properly, especially fairness. The
company will always try to improve and evaluate performance, thus investors will not hesitate
to invest their capital and can take the necessary attitude, especially for minority shareholders.
6. C.K. Tang used three different privatization methods. Explain how these
different methods work and the pros and cons of these different methods from
the viewpoints of the shareholder(s) wanting to take a company private versus
minority shareholders who may prefer that the company remain listed.
ANS: C.K. Tang used three different methods of privatization, namely:
1. Efforts to privatize the first business method: Scheme of Arrangement
In the first privatization attempt, C.K Tang used a regulatory scheme. At the date of October 29,
2003, Tang Wee Sung was offered a minority shareholder of S $ 0.42 per share. This is a
premium price of around 35% above the closing average price for 5 last trading days. This price
also means a 19.2% discount on tangible net assets company on September 30, 2002. However,
there are cons of privatization efforts first of these, namely the resolution of the company failed
to be achieved. As a shareholder wants to take a private company (privatization), they feel that
price offered too low and want more information about prospects the company they are going
to privatize.
2. Efforts to privatize the second business method: Unconditional Cash Offer
In the second privatization effort, C.K Tang used an unconditional cash offer In December 2006,
Tang Wee Sung and his sister Tang Wee Kit, offered holders shares of S $ 0.65 per share
through Kerith Holding. This second attempt is in the form of an offer cash without conditions. S
$ 0.65 share offers a 16.1% price premium to the price C.K. covers Tang at that time. It also
represents a 9.4% premium for the net asset value company, based on annual reports for the
financial year ending March 31 2006.
The cons that occur in the second privatization attempt are when the deadline for bids ended,
inadequate acceptance was received. The reason, they undervalue Tangs Plaza commercial
property. As a result, the company continues to be listed on SGX (Singapore Exchange
Commerce, Stock Market, and Business). On July 15, 2008, at the Annual General Meeting,
minority shareholders question the board about the company's financial losses, as well as plans
for company registration of SGX. The Council states that privatization exercises are solely the
decision of the majority shareholder. The council said it owed a lien to shareholders, which is
protecting the company's business. An attempt to vote against standard resolutions, such as
advances for payment of directors' fees being refused, because of majority ownership of the
Tang family.
3. Efforts to privatize the third business method: Voluntary Delisting
In the third privatization effort, C.K Tang used voluntary delisting. The Tang brothers made their
third attempt at privatization through the holding investment method, Tang Unity Three, which
submitted a delisting proposal to the company. Other shareholders offered S $ 0.83 per share,
representing a 22% premium and 21% discount for net assets as at 31 December 2008. The
Board recommends that minority shareholders accept the offer, based on an evaluation of the
offer provided by PwC.
The counter that occurred during the third privatization effort was at the General Meeting
outside Ordinary held on July 31, 2009, minority shareholders questioned if the offer is
reasonable, given that the stock has been closed at the price above offered. Even so, the board
still recommends these shares. Though on the Previous statement, Tangs said that the offer of
privatization was for allows shareholders to monetize the value of their investments at prices
the premium exceeds the historical trading price.
As a result of the emergence of this counter, shareholders denounced the directors for failing
to clarify with Tangs about the rebuilding plan for Tangs Plaza after privatization. They
expressed their disappointment with the independent director, said that they did not analyze
the issue enough. Doubt increases regarding the independence and neutrality of the company's
CEO at the time, Foo Tiang Sooi, because of him personally related to Tang Wee Sung. However,
he rejects this fact as a matter related.
Other shareholders called for a motion of no confidence in the chairman of the board. After
consulted with legal advisors, the council rejected the motion, with the chairman saying that
the action was an attempt to derail the meeting. As shareholders, they tried to investigate
further, but the chairman had called for the voice taken. Resolution to privatize the company
was passed with 96.25% of the voters support the privatization proposal.

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Assignment #2 Name: M Fahad Batavia CLASS: BBA 8 (SMCHS) ID: 11184 FACULTY: Sir Muhammad Sharif SUBJECT: Fundamentals of Corporate Governance

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ASSIGNMENT #2

NAME: M FAHAD BATAVIA

CLASS: BBA 8 (Smchs)

FACULTY: Sir Muhammad Sharif

SUBJECT: Fundamentals of corporate governance

1. In cases of companies where there are controlling shareholders, explain why

2. Should independent directors be primarily concerned with the interests of

4. Do you believe that the basis of valuation was fair? Explain.

5. With regards to the privatization episode, suggest improvements that would

1. Efforts to privatize the first business method: Scheme of Arrangement

3. Efforts to privatize the third business method: Voluntary Delisting

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