Local leaders in corporate governance outperformed the broader Straits Times Index (STI) since 2008, proving the value and importance of transparency, says David Gerald, founder, president and CEO of the Securities Investors Association (Singapore).
SIAS constructed a portfolio featuring winners of SIAS’s Singapore Corporate Governance Award (SCGA) and tracked its performance from Jan 10, 2008 to Sept 28, 2022. Using market capitalisation as portfolio weights and adjusting for corporate actions, the SIAS SCGA portfolio produced a cumulative total return of 110%, beating the STI’s 59%.
Speaking at the Investors’ Choice Awards 2022 presentation ceremony on Oct 7, Gerald says there is “no better example” of the importance of corporate governance. According to Gerald, SIAS is looking to construct a model portfolio — “or even an index” — comprising SCGA winners in the coming months.
The winners of this year's Singapore Corporate Governance Award are Keppel Corporation, Del Monte Pacific, Propnex, Stamford Tyres Corporation, CapitaLand Integrated Commercial Trust and Singapore Post.
However, there remains room for improvement, says Gerald, a former lawyer. “Very few companies use an external party to conduct board or individual director appraisal. As such wider-reaching appraisals are only truly independent if conducted by unrelated third parties, I urge more companies to adopt this practice to enhance board effectiveness.”
In addition, only 19.4% of companies disclosed that remuneration committees had linked risk management and remuneration. “More companies should consider adopting this measure,” says Gerald.
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Companies are still paying “lip-service” to the law and rules, satisfied with just ticking the boxes of compliance, says Gerald. “There is an urgent need to move from the letter of the law to the spirit of the law.”
“Due to the collapse of organisations like Noble, and more recently, Hyflux and Eagle Hospitality, where many retail investors lost their investments, and some even their retirement funds or life-savings, SIAS has been studying ways to try and help investors avoid such investment blackholes,” says Gerald.
To help investors navigate the challenges in managing their investments, SIAS will be exploring ways to monitor companies, their performance indicators and corporate governance, says Gerald.
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“By actively engaging shareholders and educating them about the challenges the companies face and their planned corporate actions, shareholders are enlightened to make more informed decisions,” he adds. “Through such proactive shareholder engagement, complex corporate actions are better explained to allow stakeholders to work together.”
SIAS introduced a new honour at the 23rd edition of the Investors’ Choice Awards. In addition to the established award categories of Shareholder Communications Excellence, Best Retail Broker, Most Transparent Company and Financial Journalist Of The Year, the inaugural Investors’ Choice Outstanding CEO Award went to Keppel Corp’s CEO and executive director Loh Chin Hua, DBS Bank’s group CEO Piyush Gupta, Marco Polo Marine’s Sean Lee and Sembcorp Industries’ group president and CEO Wong Kim Yin.
