Menon said that companies’ board of directors, auditors and shareholders all have a part to play in doing better to build trust. — The Straits Times
SINGAPORE: Singapore-listed companies can do better in evaluating their boards, having greater board diversity and providing reliable financial reports and disclosures.
These will help to shore up trust among investors and shareholders, according to Monetary Authority of Singapore managing director Ravi Menon.
His call came even as companies here have improved in their corporate governance performance, with big companies scoring an average of 69.5% in 2023, according to a report by the National University of Singapore’s centre for governance and sustainability. This is an improvement over the 65.7% in 2022.
Big companies are those with market capitalisation of US$1bil and above as at Dec 31, 2022.
Menon was speaking at the launch of Corporate Governance Week 2023 by the Securities Investors Association (Singapore) or Sias.
Despite the overall improvement in scores, Menon said that companies’ board of directors, auditors and shareholders all have a part to play in doing better to build trust, which is the bedrock of the financial sector.
Company boards are already required to do a formal annual assessment of the effectiveness of board committees and directors, and also have to disclose how they conduct this assessment.
“But introspection on performance has been an area of missed opportunity for most listed companies here,” Menon said.
He referred to a 2022 KPMG survey which found that around half of listed companies are still providing boilerplate disclosures and are unwilling to disclose any objective performance criteria.
Board members’ contributions are also often limited to their rate of attendance at meetings, he said, while boards often do not address the outcome of the assessments.
Corporate boards should also be more diverse in skills and expertise, Menon added.
“Boards need to look beyond the more traditional areas of expertise such as accounting and legal expertise and consider bringing in experts in emerging areas like technology and sustainability.”
Auditors also have a critical role to play in providing assurance that financial disclosures are true and fair, since investors make decisions based on the financial statements by listed firms, he added.
Furthermore, shareholders themselves need to exercise market discipline.
“We need more informed public discourse on corporate performance and strategies,” Menon said, adding that the media should pay attention to governance aspects when reporting on listed companies, because the media has a vital role in informing and educating retail investors in particular.
Finally, companies should build an internal culture based on the right values, he noted.
“Simply keeping within the boundaries of what is legal is not sufficient to earn trust. Trust is earned by doing the right thing,” he said.
This is where company management has to lead by example and also create a safe environment for whistle-blowing, allowing anyone to report ethical breaches confidentiality. Human resources policies should also be aligned with a culture of trust and ethics, Menon added.
Doing good also meant looking at how profit-making activities impact society, which includes sustainability concerns, he said.
Firms should put in place high-quality and credible sustainability disclosure practices, while steering credible transition planning, he added.
Sias president and chief executive David Gerald agreed that amid some bright spots, there is more to be done.
He noted that more than two-thirds of companies did not disclose their policy on the payment of dividends if their companies paid dividends for the financial year, which affects retail investors.
“In a market that relies on the principle of ‘buyer beware’, where shareholders and investors are ultimately the buyers who have to beware, I must say that these numbers are uncomfortably high,” he said.
He also referred to a paper by the Columbia Journal of Asian Law in 2015 that revealed that more than 90% of listed firms here have block shareholders – people who own a large amount of the company’s shares – who exercise controlling power.
This presented challenges in ensuring the accountability of these shareholders and protecting minority shareholders’ interests.
“For instance, it has meant several controlling shareholders have in recent years attempted to privatise their companies at prices that Sias felt were clearly too low and unfair,” he said. — The Straits Times/ANN
