According to reports, supermarket operator Sheng Siong has made a net profit of S$29 million in the first quarter of this year (Q1). Compared to this time last year, its net profit has increased by 49.9 per cent due to a combination of (1) revenue jump, (2) better gross margin, (3) higher other income, and (4) a less-than-proportional increase in operating expenses compared to the rise in revenue.
Clearly, the COVID-19 pandemic and panic buying by consumers has boosted its coffers. That said, the supermarket giant has not disclosed any dividend payments. It is however giving all employees (barring directors) an additional month of salary for their hard work throughout the period of increased demand in Q1.
By choosing to recognise the efforts of its front line staff, Sheng Siong is displaying great leadership, It is also telling that it has chosen not to reward its directors in this payout. Directors are usually the highest paid in any set up and would thus arguably be the least financially affected by the economic impact of COVID-19. Recognising this and prioritising general staff sends a message of solidarity.
Not paying out dividends is also a prudent move. A business needs to think about its long term plan before rushing to pay dividends. It needs to balance ploughing money back into the business to ensure that it is delivering the best service possible to its customers with ensuring that its staff are properly remunerated while also ensuring that its shareholders are kept happy.
What a responsible business should never do is to prioritise payments to shareholders over delivering the best service possible to its customers. In these uncertain times, it is heartening to see that Sheng Shiong is ostensibly doing this.
It would be interesting to see what the government affiliated National Trades Union Congress (NTUC) will do. While NTUC does not have dividends to pay as it is a social enterprise, will it also reward its workers as what Sheng Siong did?
And what about other government affiliated companies that have dividends to pay?
Let’s take SMRT as an example. SMRT has in the past been criticised for paying out dividends over ensuring a good service to its passengers. SMRT was a publicly listed transport operator in Singapore. In every financial year from 2000 to 2015, SMRT earned an operating profit in the range of $84.2 million to $197.2 million. There was never a year in which SMRT made a loss. And from FY2001 to FY2015, SMRT paid out a total dividend sum of $1.6 billion with the bulk having gone to Temasek. Today, we don’t know because SMRT has been 100 per cent bought up by Temasek and it no longer publishes its annual finances since 2017.
Will NTUC — a labour union and social entreprise — behave differently especially in light of the benchmark set by Sheng Siong, a for-profit company?

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