Opening Address by Mr David Gerald, Founder, President & CEO, SIAS at briefing on Investor Choice Awards – 10 July 2017, 10am at NUSS Guild House, Suntec City

Date: July 10, 2017

Good morning ladies and gentlemen,

Members of the press and SIAS

Thank you for taking time off your busy schedule to be with us this morning. This morning we update you on the selection processes for SIAS Investors’ Choice Awards in 2017.

Many have asked me this question – as an investor body, why is SIAS focused on corporate governance?

Investors essentially want to know that their investments are safe when they place their monies in a company. Investing your money in a corporation is the same as hiring an agent to invest it on your behalf. To safeguard your investment you need to be able to trust the agent you hired.

It is very easy for an agent who is not watched carefully to place his or her own interests over shareholders and investors. For instance, if a CEO spends company money on gold toilet seats for his vacation house; he is stealing from you. If the board is made up entirely of his or her buddies; they are likely to let him get away with this. You would never even know about it. Therefore, championing corporate governance and pushing for higher standards, investors would be reassured that their investments are managed correctly. The companies must be governed well. Many investors have lost their life savings in companies where governance has failed. Nevertheless, it is now well established that well-governed companies find it easier to attract funds.

So to put in layman’s terms, corporate governance, is another way of saying that there is effective oversight of the corporate managers, your agents. Usually this involves having effective transparency in board decisions and making sure that there are independent, outside directors who sit on the board. Therefore, to help investors identify well governed companies that they can invest with peace of mind, SIAS, since Year 2000 has recognised companies with good transparency, and in 2000, SIAS launched the Most Transparent Company Award. In 2002, Singapore introduced its first CG Code. The code was not prescriptive, but was on the basis of comply or explain. To encourage compliance with the code recommendations, SIAS introduced the Singapore Corporate Governance in 2003.

Today, SIAS continues to rate and recognise well-governed companies with the help of partners like, NUS CGIO – using the “STARS” governance framework developed for SIAS to shortlist the companies; Thomson Reuters for evaluating companies’ financial performance, and other industry partners, through the Investor Choice Awards. As this is an award presented by investors, for investors, to assist them to choose not only well-governed companies but also, financially well performing companies for investing. Contrary to the belief of some, SIAS awards presents Singapore Corporate Governance Award with the help of many supporting organisations.

Prof Loh from NUS CGIO will be taking you through the research methodology, criteria and scorecard later. Let me provide you with an overview of this year’s Investor Choice Awards and some of the additions and changes that we are putting in place to better reflect the market trends and needs of investors.

Focus on corporate governance 

This year is the 18th year that SIAS is organising the Investor Choice Awards, and given the changes in the environment and the progression of corporate governance trends, SIAS has taken the opportunity to refresh the Investor Choice Award categories to better reflect these trends and to focus on corporate governance.

Firstly, SIAS will focus more on corporate governance and extending to more companies. We have, since the beginning in Year 2000, recognised the importance of effective transparency in companies. As this forms part of the basis of corporate governance criteria, we are incorporating this criterion into our Corporate Governance Award criteria and doing away with the Most Transparent Company Award. In addition, we are extending the award by recognising companies with the best corporate governance practices by industry and sector. This would help investors better identify well run companies and benchmark them with the best in class within their specific industries. I am also reliably informed that many winning companies have been canvassing their recognition by SIAS at roadshows.

Secondly, we will be launching two new awards this year – the Sustainability Award and Shareholder Communications Excellence Award.

Today, many investors are also using non-financial data to make informed investment decisions. With the introduction of ‘comply or explain’ on Sustainability Reporting for all SGX listed companies from financial year ending 31 Dec 2017, we feel strongly that now is the time to encourage more companies to adopt ESG principles and to recognise companies who do well in sustainability. When the haze last hit Singapore, companies that were not environmentally friendly saw their products taken off shelves in supermarkets. Investors are becoming more sophisticated and are looking at sustainability at greater interest, especially in evaluating risks.

As an investor body, how companies interact with shareholders is an important criteria, as such, SIAS is launching the new award, the Shareholder Communication Excellence Award, in collaboration with Investor Relation Professionals Association (Singapore) (IRPAS). The award recognises best practices in shareholder communication and recognises the companies that excel in these practices. Prof Loh will be taking you through the criteria and scorecard soon. We have decided to present this award to give recognition to companies that excel in communications with their stakeholders. Some companies do not even have investor relations function. Only when they meet with a crisis, they scramble around for professional help. This is not peculiar to mid and small cap companies only, but also to some of the big cap companies. IR function is important for retail shareholders as they do not have easy access to senior management. There are still companies reluctant to communicate with their shareholders on their concerns relating to the companies.

To encourage companies to engage their shareholders constructively and to help shareholders to focus on critical areas for discussion, SIAS launched the ‘Questions on Listed Company’s Annual Report’ in 2016. Consequently, we hope this will raise the quality of meetings. Unfortunately, majority of the companies are still reluctant or slow in responding to our questions. We urge shareholders to pose our researched questions to the Board.

Awards are with Industry Associations

While Prof Loh will be sharing with you in greater detail the research methodology and scorecards, let me share with you the selection committees. The award selection committees comprise of industry leaders and associations who review the shortlisted companies and deliberate on the winners. For instance, the Singapore Corporate Governance Award, the Chairman of the committee is Mr. Gautam Banerjee, Chairman, Blackstone Singapore Pte Ltd and the following partners and associations. The input on the awards come from fund managers, journalists, brokers, analysts and other industry professionals all of whom are represented in the Selection Committee. A rigorous screening process is first conducted by NUS CGIO with inputs from Thomson Reuters. The Selection Committee rigorously scrutinizes the candidates for the awards.

All awards are conducted with similar Selection Committees. SIAS is just one of the many Selection Committee members with one vote only.

Other Awards

SIAS continues to recognise the important role financial journalists play in providing information to investors through Financial Journalist Award. With ACCA, our research shows that many investors rely on the financial news from the media as their primary source of information to make their investment decisions. In this award, editors nominate stories and commentaries from their seasoned and most promising financial journalists for the selection committee to evaluate.

SIAS also recognises the role brokers play in helping investors and encourage brokerage firms to better their quality of service e.g. in compliance, research and education as well as and information provided to retail investors to ensure that retail investors have good understanding of what they invest in. Awarded with knowledge partners SMU and Investment Trends, using both quantitative and qualitative research, the brokers are selected with a panel overseeing the selection process which is supported by SGX and SAS.

Improving corporate governance in Asia

The 18th Investor Choice Awards will be presented on the 19th September with Ms Sim Ann, Senior Minister of State, Ministry of Culture, Community and Youth & Ministry of Trade and Industry as the Guest of Honour.

Today, there is empirical evidence that companies that have good corporate governance practices have better performance. Our past research with SMU has shown that Singapore Corporate Governance Award winners have outperformed the STI Index. Therefore, investors should be comforted that using corporate governance as criteria for investment decision making can help them improve their investment returns. Thus, I am sure all of you can’t wait to see who this year’s winners will be.

This year, SIAS is again pleased to present the 8th Corporate Governance Week, commencing with the Global Corporate Governance Conference on 18th September 2017 with the theme; Purpose, Values & Culture – How Does it Drive Governance? The Guest of Honour is Sir Winfried Bischoff, Chairman, of the Financial Reporting Council, United Kingdom. With speakers and panellists from OECD, Europe and Asia, the conference will discuss latest trends and thinking on corporate governance and highlight best practices of companies today to stay ahead.

I look forward to seeing you all at the upcoming Corporate Governance Week Programmes.

Thank you.