Date: January 10, 2018
The consultation paper announced by SGX to review the quarterly reporting framework is timely, as there is a need to recalibrate the current framework to strike a balance between investors’ need for periodic disclosures and the cost to companies.
While the proposal may bring a welcomed relief for many of the smaller companies which have lamented that the burden of compliance costs has increased, companies should proactively balance the removal of quarterly reporting with more communication with shareholders on their performance and initiatives in the company, and companies should aim to provide continuous disclosure. This would remove the fear from shareholders that many companies, particularly, the smaller SMEs, who rarely engage shareholders and only communicate via the quarterly announcements.
SIAS advocates that companies should focus on long term vision and plans to deliver shareholder value. SIAS acknowledges that quarterly reporting can, at times, result in short termerism. Specifically for some companies who are in highly cyclical industries, their quarterly income curves could fluctuate significantly and is not at all representative of their annual income curves.
Fundamentally, it is the trust and confidence that the board and management must build with its stakeholders which is underpinned by the application of fiduciary standards of care and the alignment of incentives.
Nevertheless, in today’s advanced accounting systems and processes, management can get real time updates to track the health and performance of the business. Essentially all well managed companies have well defined financial management systems which document the financial position of the company at any moment in time. Thus we do not expect much difficulty in companies to engage shareholders on an on-going basis.
Founder, President & CEO
Securities Investors Association (Singapore)