SINGAPORE (Dec 5): The introduction of dual-class shares (DCS) has damaged Singapore's regulatory creditability and contradicts investor stewardship, suggests findings from a report by the Asian Corporate Governance Association (ACGA) and CLSA Limited.
According to the ninth edition of CG Watch, a regional report jointly conducted by ACGA and CLSA on corporate governance (CG) in Asia-Pacific published every two years, Singapore is found to be a “contradictory city” for its mixed survey findings.
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In a media release issued Wednesday, ACGA and CLSA say CG policy contradictions were apparent despite Singapore’s revised CG Code and changes made to enforcement strategy and listing rules.
Both parties also highlighted a “lack of transparency” in MAS funding for securities regulation, while information was sparse on certain proposed new laws.
While ACGA and CLSA note how the new Singapore Exchange Regulation (SGX RegCo) has brought “more vigour” to Singapore, they add that a litany of corporate scandals has raised doubts about the deterrence effect of enforcement.
Ambitions of independent audit regulators also appear diminished, in their view.
As in previous years, the report comprises two distinct surveys including a company survey conducted by CLSA analysts around the region on corporate governance practices among 1,100 firms listed in Asia Pacific..
A separate market-ranking survey was carried out independently by ACGA on macro CG quality in 12 markets in Asia Pacific, where Singapore was found to have fallen to third place in 2018 from second place in 2016.
“Despite falling to third in the CG Watch 2018 market survey, Singapore’s CG ecosystem has strengthened in various areas such as new rules on voting for independent directors,” comments Jamie Allen, secretary general of ACGA.
“That said, the regulatory low point of the past two years was the introduction of DCS and it is still debatable whether the policy change is worth the reputational damage as not one DCS firm has been listed so far in Singapore,” he adds.
For the company survey component of the report, the best-performing category in terms of regional average scores was ‘auditors & audit regulators’, with the worst-performing being ‘investors’.
It was also found that Southeast Asian markets tend to do well in ‘CG rules’, but underperformed in ‘government & public governance’.
“Asian corporate governance reform has made significant strides over the past 20 years through a balanced focus on three key pillars: transparency, accountability, and fair treatment of shareholders. However, the introduction of dual-class shares in Hong Kong and Singapore, and other markets possibly following suit, is undermining the principle of fairness. This could have a far-reaching adverse impact on investor trust in Asian regulatory systems,” says Allen.
Established in Hong Kong in 1999, ACGA is an independent, non-profit membership organisation dedicated to promoting long-term and substantive improvements in corporate governance in Asia through research, advocacy and education. CLSA is one of Asia’s leading capital markets and investment group, providing global investors with insights, liquidity and capital to drive their investment strategies.
