The Singapore real estate market has been active in trading over the past year, with the stock prices of various real estate companies skyrocketing. However, Hong Fok Corporation has recently attracted the attention of corporate governance experts, not for its performance, but due to its long-controversial compensation system.
The local research organization Corporate Monitor recently released a report on Hong Fok Corporation, indicating that the executive compensation is inconsistent with performance, as well as various issues related to corporate governance, executive pay, and asset efficiency.
Hong Fok Corporation is a typical family-controlled enterprise, with the Zhong family directly or indirectly holding nearly 70% of the company's shares. The family's high degree of centralization is reflected not only in the equity but also in the composition of the management team.
<h3>Zhong Family Receives Over 16 Million in Compensation, Two Presidents' Pay Once Surpassed Guo Father and Son</h3>
According to the company's annual report, six of the top ten highest-paid individuals at Hong Fok Corporation are direct members of the Zhong family. The company's three executive directors are the late real estate tycoon Zhong Yizhuang's two sons and one daughter.
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The total compensation for the two co-presidents in 2024 exceeds 9.9 million. In comparison, the total compensation for Guo Lingming and Guo Yizhi, the father-son duo from City Developments, was 8.95 million that year.
Among real estate companies, Hong Fok Corporation is also the only one where the president's compensation approaches 10% of the company's revenue. The second place, Stamford Land, is at 4.9%, while other similar companies do not exceed 2.5%.
It is estimated that if other family members are included, the Zhong family received compensation ranging from 16.1 million to 17 million from Hong Fok Corporation in 2024, accounting for about 16% of the company's total annual revenue.
In the latest announced performance for the fiscal year 2025 ending last year, Hong Fok Corporation's net profit surged by 116% to 30.6 million. However, a closer look at the revenue figures shows a decline of about 6%
<h3>Net Profit Growth with Revenue Decline: Hong Fok Relies on Book Profit</h3>
The reason for this is mainly that Hong Fok's profits benefit from its real estate revaluation gains, particularly from its assets such as the International Building and Yotel hotel. In 2025, the book value of these assets increased by approximately 16.2 million yuan, significantly more than the previous year's 11.84 million yuan.
Although this is accounted as profit, it is essentially paper wealth and does not represent actual cash received by the company.
If we peel back the layers of book value appreciation, Hong Fok's real estate development business has actually seen a decline in revenue. This includes a drop in sales of remaining residential units in the development project Concourse Skyline.
In terms of stock price, compared to other real estate stocks that have risen by at least 30% to 70% or even doubled in the past year, Hong Fok's stock has only slightly increased by 5.06%.
At a recent 2024 shareholders' meeting, independent director Tan Kok Kwee pointed out that about 50% of the total remuneration for executive directors is in bonuses, which is the result of management's decisions and actions over the past few years &#34;to create value for the group,&#34; including the development of Concourse Skyline, increasing rents at The Concourse, and developing the Yotel hotel.
He also mentioned that these decisions and actions have increased the group's assets to approximately 3 billion yuan, and the calculation of bonuses is based on a three-year average profit amount.
In fact, Concourse Skyline is a project completed in 2014. Since then, Hong Fok has not launched any new development projects.
<h3>Director Remuneration Based on Book Earnings: Difficult to Recover if Real Estate Valuation Declines</h3>
It is noted that the revaluation gains from investment properties are ultimately just book earnings, and these unrealized gains account for over 80% of net profit. In other words, the group's directors largely benefit from the book value appreciation brought about by asset revaluation.
&#34;More accurately, the revaluation gains reflect the overall increase in local real estate value, which is passive income that Hong Fok Group can obtain without any effort or wise decision-making.&#34;
<h4>Extended Reading</h4>
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After excluding these earnings, Hong Fok Group's net profit margin has actually been declining in the long term.
Mingjian therefore believes: &#34;If the valuation of investment properties is adjusted downward in the future, and there is no claw back provision for the executive directors' remuneration, this will adversely affect profitability and harm shareholder interests. The fairness of the current method is questionable.&#34;
If high salaries could lead to excellent operational efficiency and asset appreciation, perhaps shareholders would have fewer complaints. However, Mingjian believes that Hong Fok Industrial's performance on several key financial indicators is poor.
Mingjian compared Hong Fok's operational performance over the past five years with that of its industry peers and found that its gross yield on real estate investments was only 2%, and its net operating yield was only 1%. In contrast, the average levels for other peers in these two metrics were 4.5% and 3.3%, respectively.
The controversy over the executive compensation at Hong Fok Industrial has not arisen overnight. At the annual general meeting in 2012, a few shareholders had previously questioned the management on this issue. Halfway through the meeting, then-chairman Zhong Jinbang confronted the shareholders, demanding a change in the voting method, which caused many attending shareholders to leave in anger.
After the incident was reported in the newspapers, the Singapore Exchange issued an inquiry requiring Hong Fok Industrial to explain. The company subsequently established a compensation committee, hired the consulting firm HR Guru, and distributed dividends.
<h3>For years, only 1 cent dividend, total dividend less than executive directors' remuneration</h3>
However, these measures did not alleviate shareholders' concerns. This is because, while Hong Fok Industrial is generous to family members, its dividend policy can be described as stingy. According to records, Hong Fok Industrial has maintained a dividend of 1 cent per share from 2020 to 2024.
Over the past five years, the total dividends distributed to all shareholders amounted to SGD 41.5 million; in comparison, the total remuneration for the three executive directors was SGD 60.5 million, which is 150% of the former.
According to Mingjian's calculations, if the fair value changes of investment properties are excluded, this means that the three executive directors took nearly 50% of the core net profit, while shareholders received only 34.2% of the dividends
In the latest performance report for the fiscal year 2025, which ended last year, Hong Fok still only distributed a dividend of 1 cent per share.
Lianhe Zaobao sent an inquiry to the investor relations department of Hong Fok regarding the company's compensation policy, dividend distribution, and future operational outlook, but did not receive a response by the time of publication.
With the Singapore Exchange requiring listed companies to disclose specific director salaries, the transparency of local director compensation has improved. According to the Singapore Institute of Directors (SID) report on the 2025 Singapore listed company director survey published last November, the disclosure rate of compensation details for these companies increased from 27.8% in 2023 to 67.8%, with large companies accounting for as much as 88.2%.
However, despite the increase in transparency, many investors still hope that regulatory agencies will focus on strengthening the link between director compensation and company performance to avoid situations where some directors receive high salaries but contribute little, while the company pays low dividends, and to promote the implementation of compensation voting rights policies to protect minority shareholders who are in a weaker position.
This is particularly important in family businesses. Data shows that 85% of executive directors locally are major shareholders or have familial ties to major shareholders.
Mingjian suggests that Singapore could consider referencing the systems of countries like Switzerland or Australia, granting shareholders a voice on compensation issues, including annual votes by shareholders on the compensation of directors and executives, where if the vote fails, the company cannot pay the related amounts; and implementing a two-strikes rule, where if more than 25% of shareholders oppose the compensation report for two consecutive years, the entire board of directors must be re-elected.
As for Hong Fok, which is about to announce its 2025 annual report, how much will executive compensation reach? Will the company be able to address these concerns at the upcoming shareholders' meeting? The market is watching closely

Hong Fok has not had any new development projects in the past decade, but executive compensation remains high, mostly consisting of members of the founding Zhong family. Despite the active real estate market in Singapore, Hong Fok has sparked controversy due to its compensation system. The report indicates that executive compensation does not align with performance, with the Zhong family receiving about 16% of the company's annual revenue in 2024, reflecting a high concentration of family control

Hong Fok Industries offers high salaries and low dividends. Are investors paying for performance or for family profits? | Lianhe Zaobao