Date: October 12, 2015
The Governance Evaluation for Mid and Small Caps (GEMS) addresses the limitations of existing corporate governance indices in several respects. First, it evaluates corporate governance practices over three years rather than on an annual basis. Second, it focuses on observable, quantifiable and verifiable metrics that reflect actual corporate behaviour, rather than mere disclosure of policies, practices or intent to adhere to corporate governance best practices. This addresses concerns that disclosures often reflect form rather than substance and may not reflect what is actually practiced by the company. Third, unlike existing corporate governance indices, GEMS is developed specifically with mid and small cap companies in mind. It focuses on factors of importance to such companies, such as stability of ownership and succession risk. Fourth, it recognizes the importance of regulatory risk on the protection of minority shareholders, and therefore uses indicators that differentiate companies on such risk. GEMS cover companies with market capitalization of no more than S$500 million which are listed on the Main Board or Catalist of the Singapore Exchange (SGX). This currently makes up over 80% of listed companies.
At the initial launch in April 2015, 428 companies were assessed with the Top 10% of the companies assessed for 2014 rankings announced. The latest survey update is based on the top 150 companies in the GEMS 2014 ranking and market cap as at 30 April 2015. This update uses information from annual reports from April 2014 to April 2015 and announcements up to July 2015.
The GEMS research found that companies assessed in the update fared well. In general, the top-ranked companies did well on most areas of the scorecard. They demonstrated long term stable ownership of major and/or substantial shareholders with 89.2% of the assessed companies having a large substantial shareholder not selling off shares in excess of 20% over the last 3 years. The boards and senior management are well constituted, diverse and experienced with 91.2% having a CEO with at least 10 years of experience and 95.3% have no more than 2 changes for each key management position within the last 3 years. Companies that have good and open communication with shareholders and those that consistently reward shareholders with dividends also scored higher.
In this update, the top 11 companies which had a score of 85 or more based on the GEMS scorecard are: CEI Contract Manufacturing Limited, Hi-P International Limited, Hiap Seng Engineering Limited, Hotel Royal Limited, KSH Holdings Limited, Micro- Mechanics (Holdings) Limited, Qian Hu Corporation Limited, Rotary Engineering Limited, Stamford Tyres Corporation Limited, Trek 2000 International Ltd, Tuan Sing Holding Limited. Henceforth, all qualifying companies will be scored and the list of top companies will be released in the fourth quarter of each year.
ﾓIn developing GEMS, we have focused on factors that are most relevant to SMEs. We feel that existing governance ratings may not do justice to the better governed SMEs and hope that investors and other stakeholders will use GEMS when they are evaluating the governance of listed SMEs,ﾔ Assoc. Professor Mak Yuen Teen, NUS Business School.
ﾓI am pleased to note that 11 companies in this latest update have done so well. The methodology of GEMS is highly rigorous and this can provide investors with the comfort of investing in them,ﾔ David Gerald, Founder, President and CEO, SIAS.
“The score attained by the top companies in this update, in general, is higher. I believe this demonstrates listed SMEs are more aware of the potential benefits of good practices in corporate governance and are also more willing to be compliant with the Code of Corporate Governance,” Lawrence Kwan, Council Member, Singapore Association of the Institute of Chartered Secretaries and Administrators (SAICSA).
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About Prof Mak Yuen Teen
Prof Mak is Associate Professor of Accounting at the NUS Business School where he teaches corporate governance and ethics. He has served on committees developing codes of corporate governance of listed companies and charities. He has also served on the boards of large not-for-profit organisations and on audit advisory committees of UN agencies in New York. Prof Mak has chaired or served on judging panels for corporate governance-related awards here and overseas. He has also played key roles in the development of a number of corporate governance scorecards and ratings. Prof Mak is frequently described as a corporate governance advocate for his work in promoting good corporate governance here and overseas since the late 1990s.
About Securities Investors Association (Singapore) (SIAS)
SIAS, a registered Charity and Institution of Public Character, is the largest organised investor lobby group in Asia, with almost 71,000 retail investors as members. It is run by a Management Committee comprising of professionals who are volunteers. It actively promotes Investor Education, Corporate Governance and Transparency and is the watchdog for Investor rights in Singapore. To-date, SIAS has since year 2000, successfully organized over 1000 investor education programmes ranging from basic investment seminars for novices to certificate courses for investment savvy investors. Thus far, about 150,000 retail investors have benefited from these programmes, which are offered largely free. Members are educated on the features of investment products, and the attendant risks involved in each product. Investors are taught to make informed decisions on investing. SIAS is able to provide a variety of investor education programmes to its members and the investing community at large through collaborative arrangements with financial institutions and listed companies interested in investor education as part of its corporate social responsibility agenda.
About Singapore Association of The Institute of Chartered Secretaries (SAICSA)
The Singapore Association of The Institute of Chartered Secretaries (SAICSA) was founded in 1961 to promote and advance effective governance and administration of organisations in the private, public and non-profit sectors through the continued development of corporate governance and corporate secretarial administrative best practices. Members of SAICSA can be found in various organisations such as corporate secretarial firms, legal firms, international accounting firms, multi-national corporations, public listed companies, government departments and statutory boards.
Handshakes is a data analytics company that provides quick and convenient access to curated data about companies and the people who run or own them. Handshakes offers integrated information from thousands of disclosure documents in the public domain, and technologies to intuitively analyse and present qualitative information. Handshakes was founded by ex-regulators with a vision of making information more accessible and markets more transparent for investors.