Date: September 25, 2018
Guest of Honour- Mr Edwin Tong, Senior Minister of State for Law and Health
Mr Daniel Teo, Chairman SIAS
Mr Muthukrishnan Ramaswami, President, SGX
Distinguished guests
Ladies and gentlemen
Thank you Minister for joining SIAS tonight to celebrate excellence in governance transparency and communication.
Thank you for joining SIAS tonight to celebrate excellence in governance.
This is the night that I look forward to each year, when like-minded people in the investment community – regulators, companies, professionals, retail and institutional investors – get together to celebrate and laud role models in corporate governance.
This dinner also epitomise the strong endorsement and support that SIAS receive from all our event sponsors, table sponsors, endorsers and all companies who participated in this year’s Corporate Governance Pledge. It is your support that allows SIAS to go further each year on our journey in developing an educated, engaged, empowered investment community. Thank you.
Our evolution, over the past 19 years, has seen our mandate widened and today, not only directed at helping just retail shareholders but, the entire gamut of stakeholders, including companies, institutional investors and bondholders. SIAS has mediated many proxy fights, shareholder and boardroom disputes including Yellow Pages, DataPulse and Noble . More recently, we have actively participated in the restructuring efforts of distressed companies, including Ezra, Ezion and Hyflux. This year to date, we have facilitated 24 townhall meetings to help affected investors resolve their differences with companies.
We take into account the interests of all stakeholders because we believe that it is in the best interest of every party – and this include the capital market as a whole – that everyone contributes to the rescue process to return the companies to a financially more stable footing.
Our Q&As on Annual Reports and STARS
Even as our function and reach have been broadened, we have not lost sight of our primary role of supporting small shareholders. To this end, SIAS has also widened and deepened our services for retail investors, with the commencement of Q&As on Annual Reports which are sent to companies to be posted and addressed at AGMs. These questions cover governance, business strategy and the latest financial statements.
In the three years since this initiative started, we have covered more than 460 companies, issuing nearly 2,000 questions with many more sub-questions asked. These Q&As provide shareholders with greater clarity on key issues and corporate developments, and sometimes highlight lapses in governance.
The questions increasingly focused on accountability of directors, especially independent directors. Here are some of the startling observations from our analysis of annual reports:
- Use of template reports: For example, Audit committees saying that they have met the internal auditors in the CG report when they have NOT appointed any internal auditors.
- Follow-up on prior commitments: For example, companies have said that they will send new directors for training but did not follow through with it even after 2 years.
In other areas like Audit, our questions focused on the experience, expertise and efforts by independent directors on the audit committee, especially if the company’s audit had material discrepancies, emphasis of matter, qualified, adverse or disclaimer of opinion.
With respect to Key Audit Matters, the questions are designed to deepen the conversation with listed companies on KAMs, which usually involve significant management judgement around accounting estimates, such as discount rate used, revenue and growth rate projections.
These questions help both companies and shareholders to have more constructive discussions at AGMs. Over time, we believe companies will improve the quality and clarity of disclosures.
This year, our research in collaboration with NUS-CGIO, our knowledge partner, shows that the corporate governance scores of all categories of listed companies increased in 2018, compared to last year. Big cap companies, above $1 billion in market capitalisation, led the pack, despite growing at a slower pace than small and mid-cap companies.
Taking a closer look at the sectors, companies and business trusts in Properties and Transportation/Storage/Communication sectors have higher average total corporate governance scores: 50.22 for companies and 47.16 for business trusts. Companies in Manufacturing have the lowest average score of 37.17.
Areas that companies have done well include:
- Whistleblowing policy: 8.% of companies disclosed that the company has a whistleblowing policy, however, only 50.9% of companies allow anonymous reporting;
- Board appraisal: 5% of companies disclosed both the process in detail and the criteria used for board appraisal;
- Shareholders asking questions: 83.8% of companies disclosed that shareholders were given the opportunity to ask questions in the most recent AGM, and these questions and answers were recorded in the minutes.
Areas that companies need improvement:
- AGM attendance: 39.7% of companies disclosed that both CEO and all board members attended the most recent AGM;
- AGM minutes: While 66.3% of companies disclosed that they have a formal investor relations policy but only 3.9% of companies put their AGM minutes on their corporate websites;
- Training: Only 21.4% of companies published relevant data on training and continuous education programmes undergone by its employees.
Corporate governance is a journey and not a destination, and I trust companies will continue to use this information to improve their engagement with shareholders and stakeholders.
I’m happy to report that our one-of-a-kind brand of responsible shareholder activism has won praise and respect from regulators and shareholders. Boards, too, appreciate our method of engaging them in their boardrooms to try and work with one another instead of at odds with each other. I’m also heartened to report that our reputation as governance champions now extends beyond Singapore’s borders.
However, it is crucial to acknowledge that an effective regulatory system with a robust set of Listing Rules and a strong Code of Corporate Governance can only provide a reference framework or a set of desirable guidelines. The best efforts of regulators and Code framers will come to naught if companies do not conduct their affairs ethically, with integrity and transparency.
Therefore, I call on company directors and senior managers: you are stewards of your firm’s assets and should exercise the utmost duty of care in looking after these assets and in your dealings with stakeholders!
After all, it is not only Rules and Codes that have evolved over the past two decades – shareholders too have become more knowledgeable, enlightened and prepared to engage. They attend Annual General Meetings equipped with incisive questions that deserve to be answered openly and honestly.
Companies have to recognise that responsible shareholder engagement is therefore essential if they thrive and grow. The process has to be open and transparent, and it has to be conducted with mutual respect from both sides.
Tonight we celebrate excellence in corporate governance. I congratulate all the winners for their exemplary work and commitment to improve the level of corporate governance in Singapore. I sincerely thank our distinguished Guest of Honour, Mr Edwin Tong, Senior Minister of State for Law and Health, for gracing tonight’s celebration. Our deepest appreciation to all our donors, sponsors, endorsers, and supporters of tonight’s event and our 9th Corporate Governance Week.
Have an enjoyable evening.
