Date: September 16, 2024
Mr Chee Hong Tat, Minister for Transport,
Second Minister for Finance,
Deputy Chairman of the Monetary Authority of Singapore,
Mr Daniel Teo, Chairman SIAS,
Mr Sherman Kwek, Patron of SIAS,
Distinguished guests, speakers, guests from near and afar,
Ladies and gentlemen,
A very good morning to you all.
It gives me great pleasure to welcome you to the launch of SIAS’ Corporate Governance Week 2024, which is also a celebration of our 25th anniversary.
For 25 years, raising the bar of corporate governance at listed companies has been a central pillar of SIAS’ efforts. To this end, SIAS, among many initiatives, annually honours listed companies that have demonstrated outstanding performance in governance and sustainability.
The theme of this year’s Corporate Governance Conference: “The Impact of Artificial Intelligence or AI on Corporate Governance and Sustainability on Key Stakeholders’’ comprises two components which are of increasing importance to investors.
The first is AI whose impact on investments and investing has been profound, transforming how financial markets operate and how investors make decisions. AI’s influence can be observed across multiple facets of the investment landscape, from retail investing to institutional fund management.
However, while AI tools will help investors trade quicker and more cheaply, faster and cheaper does not necessarily mean better. It also does not mean that investors can ignore monitoring their investments. The same tried and trusted principles of investing have not changed – investors still have to do their homework, understand what they are buying or selling and keep track of their money.
However, the public can rest assured that SIAS will continue to track companies evaluate their governance and rate them for the foreseeable future. Let me comment on some recent Corporate Governance Research Findings:
Over the last decade, our research with Centre for Governance and Sustainability (CGS) has observed an improvement, in terms of strategy and governance disclosure.
Most companies have performed well in ensuring sustainability issues are incorporated into strategic formulation of their businesses. Also, more are adopting globally recognised frameworks in preparing reports. The average overall Singapore Corporate Governance (SCG) scores have continued their upward trend, reaching 62.4% in 2024 over a five-year period from 2020.
While external assurance is not yet mandatory, it is encouraging that many large-cap companies have proactively opted for external assurance to enhance transparency and accountability to their stakeholders. However, there is a need for improvement amongst companies in mid- and small-cap categories need to consider external assurance for their sustainability disclosures.
Assessments show that large-cap companies and trust companies are more inclined to set long-term targets, whereas medium- and small-cap companies tend to focus on shorter-term goals.
Encouragingly, most listed companies evaluated have established board or management accountabilities for addressing environmental and climate-related issues.
While companies have generally done well in disclosing materiality, stakeholder engagement, and employment practices, there is room for improvement in the social area under ESG. There are three action areas to be considered:
– Firstly, taking consumer health and safety into consideration when designing products;
– Secondly, enhancing cybersecurity systems to protect consumer’s privacy;
– And thirdly, engaging suppliers for social assessment.
However, while short-term targets are important, incorporating long-term sustainability targets can allow companies to set achievable and ambitious objectives that are aligned with broader environmental goals such as sustainable development, net zero targets or carbon neutrality.
One area of concern for SIAS is transparency. Companies, still, have some way to go to communicate their plans and actions more effectively. Companies are encouraged to improve transparency and reporting in areas where performance is weaker, such as social and organisational practices and Scope 3 disclosures.
Improving Transparency and Engagement: SIAS’ 3 Questions
To improve transparency and engagement, SIAS commenced its 3 questions on published Annual Reports in 2016. Every year, SIAS send hundreds of listed companies’ questions on three areas – corporate strategy, financial performance and corporate governance.
These questions are designed to seek better clarity of the justifications and rationale for various corporate actions, thereby enhancing shareholders’ understanding in a collaborative manner. They are not a direct challenge to management’s decision-making.
More recently, for the benefit of stakeholders, we have started emphasizing corporate value creation and capital efficiency.
The ultimate goal of this exercise is to highlight key issues facing these companies, thus equipping shareholders to ask more pertinent questions of boards and management at Annual General Meetings.
Another reason for investors to take note of SIAS’ three questions is that they are also an early warning tool for investors. Several significant issues highlighted in past annual report reviews have – sadly – since escalated into major problems affecting the companies.
For example, in SIAS’ questions to Great Eastern, we pointed out that its shares traded far below their embedded value and highlighted the misalignment of interest between the majority and minority shareholders before these issues were made public.
In other cases, SIAS has also been quick to point out perceived lack of director independence, an absence of proper internal controls in many companies and we raised concerns over workplace safety.
SIAS has also questioned companies on their purchase of foreign companies at prices far above asset values and their anticipated contributions, both ROI and ROE.
Through many such initiatives, SIAS has become an important lynchpin in the financial market ecosystem, ensuring the integrity and robustness of our capital markets, especially from the perspective of capital providers, i.e. shareholders and investors.
We will continue to do more!
Thank you, Minister, for gracing today’s Conference. Also, a big thank you, to all our distinguished speakers from near and far for your participation and all of you delegates for your attendance.
I also want to extend my deepest appreciation to all our sponsors, donors, supporters of the Corporate Governance Pledge and endorsers for coming forward to support this event, not forgetting my staff who worked very hard to make this Conference another success.
I trust you will find this week to be an enjoyable and an enlightening one.
Enjoy the conference.
Thank you.
