SINGAPORE: The debate surrounding German conglomerate Allianz’s proposed acquisition of a majority stake in Income Insurance has intensified following revelations that Ronald Ong, chairman of Income Insurance, recused himself from a critical board decision due to his role at Morgan Stanley. This development has spurred further scrutiny and calls for transparency from the public.
The Singapore insurer issued a statement in the early hours of Saturday (Jul 27), as questions emerged the day before on a potential conflict of interest due to Mr Ong’s positions in both Income and Morgan Stanley.
Mr Ong, in addition to being chairman of Income, is also the chairman of Morgan Stanley’s Southeast Asia business. He has worked for Morgan Stanley for over 20 years.
“Morgan Stanley was appointed as Income Insurance’s financial advisor after a considered selection process,” said Income on Saturday, “They were appointed based on their prior insurance transaction credentials, the experience of their deal team and their deep understanding of Income Insurance.”
Income added that an audit committee had reviewed the appointment of Morgan Stanley, before approval was given by the board. The insurer also said that none of its directors are connected to Allianz and all are therefore “considered independent for purposes of making a recommendation on the offer”.
“Notwithstanding this, and in line with good corporate governance, the board will establish an independent board committee chaired by the lead independent director and wholly comprising independent directors, to select and appoint an independent financial adviser,” said Income Insurance, “The advice of the independent financial adviser to the board on whether to recommend shareholders to accept or reject the offer (when made) will be set out in the composite document.”
Singaporeans responding to the assurances, however, are demanding full transparency and have questioned details on who served as acting chairman to approve the appointment of Morgan Stanley.
One Singaporean on Reddit asked, “So who was the acting chairman for Income pertaining to this decision or was there no chairman’s oversight during the process when deciding on this deal? Certainly we do not expect the chairman to be involved in every nitty gritty of a company’s operation but then a change in ownership will probably hardly qualify as nitty gritty?”
A commenter, however, pointed out: “No need acting Chairman for this. Ronald Ong says he recused himself, all it requires is for the rest of the BOD to carry the resolution by majority.
“Usual internal BOD dynamics will be that the Audit committee chairman is one of the next most influential board members in line. So if audit comm says nothing to fear, everyone else will agree. Everything above board, nothing to see here, move along, no blame culture.”
Others, however, argued that Morgan Stanley should not even have been in the pool for consideration given Mr Ong’s role in both companies, even if no actual conflict arose.
The deal, which will make Allianz the largest shareholder in Income Insurance, has already faced backlash as the public fears it would compromise Income’s stated commitment to Singapore’s workers.
Allianz announced on Jul 17 that it had intended to purchase 51 per cent of Income Insurance’s shares, stating an offer of S$40.58 (US$30.20) per share for a transaction value of S$2.2 billion.
NTUC Enterprise currently has a 72.8 per cent stake in Income Insurance. It promised that will remain a substantial shareholder if the sale goes through.
After the announcement, observers – including veteran diplomat Tommy Koh and two former NTUC Income CEOs – voiced concerns about how this might compromise the original mission of the company, which was founded in 1970 with the aim of providing essential, affordable insurance to underserved workers.
NTUC Enterprise chairman Lim Boon Heng, however, promised that the co-operative will continue to provide affordable insurance for lower-income customers after the deal with Allianz. Singaporeans online, on the other hand, have questioned how NTUC could ensure this since they will no longer hold the controlling stake.
TISG/