Page 70 - Demo

Corporate GovernanceQ&A ON ANNUAL REPORTSThe 7th year of the Q&A on Annual Reports initiative witnessed a significant shift in the operating environment. With all COVID-19 restrictions in Singapore lifted, listed companies resumed conducting physical Annual General Meetings (AGMs), although only a minority continued to offer hybrid formats. The Singapore Exchange (SGX) still requires companies to solicit shareholders%u2019 questions prior to AGMs, which significantly facilitated SIAS%u2019 Q&A initiative. Consistent with previous years, it is noteworthy that several companies did not receive written inquiries from shareholders, possibly indicating low or no interest in these companies by minority shareholders. While shareholders still have the option to attend AGMs in person and ask questions directly, there appears to be a muted level of interest and participation among minority shareholders, particularly in smaller companies, based on observations and anecdotal evidence.Response rateThe response rate for the Q&A initiative remained consistently high at 74% for Year 7, mirroring the average response rate observed over the past three years.The good response rate could be attributed to the established practice of SIAS sending questions to listed companies since 2016, which has become widely recognised as a best practice and standard operating procedure (SOP). With companies responding directly to SIAS on SGXNet, this initiative generates valuable social proof, fostering a positive environment that encourages other listed companies to adopt similar transparent communication approaches. Observations and anecdotal evidence indicate that shareholders frequently follow up on companies%u2019 written responses to pre-AGM questions submitted by SIAS and shareholders. These follow-up questions ensure that the engagement between companies and shareholders becomes more in-depth and meaningful, avoiding superficial or boilerplate answers.Observations by SIASShort response time to generate questionsSGX RegCo requires companies to provide at least 7 days of notice for shareholders to submit questions in advance of the AGM. In previous years, there was a longer window for SIAS to prepare the questions if the companies give more than 14 days of notice. With the latest SGX guidance, most of the companies have simply fixed the cut-off for advance questions to 7 days after the notice of AGM. As such, SIAS faced an extremely tight timeline to generate the questions compared to previous years.Better engagement SIAS formulates its questions with appropriate context and background information to ensure companies cannot simply refer shareholders to the annual report. These questions are designed to seek better clarity of the justifications and rationale, thereby enhancing shareholders%u2019 understanding in a collaborative manner, and not seen as a direct challenge to management%u2019s decision-making. For instance, instead of expressing an opinion like %u201cHaving 50% of fixed interest loans for a REIT is too low,%u201d SIAS would inquire about the framework and/or the board processes that companies use to determine their financial leverage or interest rate hedges, etc. By framing questions in this manner, the responses from companies can provide significant insights into their operations, board processes and decision-making, and risk profiles.Quality of shareholder engagementShareholders can occasionally be very proactive in sending in questions to companies. Large-cap companies generally attract more interest from investors, who often send advanced questions, although there are exceptions. Mid-sized and smaller companies can also receive questions, although these inquiries are less frequent. Companies in the spotlight, whether due to privatization or being in transition, also tend to receive more questions.Overall improvementFinally, as reported by the Singapore Governance and Transparency Index (SGTI), Singapore-listed companies showed the largest quantum of increase in the mean SGTI score since 2020. The SGTI rose from 70.6 to 74.8 in 2023, a significant improvement. The improvement in performance is not only across all assessed corporate governance dimensions, but also across all levels of performance[1]. The results of SGTI 2023 show that, as a whole, Singapore-listed companies are establishing a solid governance foundation.7025TH ANNUAL REPORT | 2023 - 2024