Only 1 in 10 Singapore listcos shows how boards make major stakeholder decisions: study
The survey of 80 Singapore-listed firms also finds that large-cap companies outperform smaller enterprises in investor relations
By NAVENE ELANGOVAN
The Business Times, 27 June 2024
ALTHOUGH the vast majority of Singapore-listed companies recognise that businesses should allocate more resources to engage their stakeholders, only 10 per cent provided case studies or examples to demonstrate how their boards considered major stakeholder decisions over the past year.
A new study, which surveyed 80 Singapore-listed companies on stakeholder engagement, also found that large-cap companies (55 per cent) outperformed smaller enterprises (19 per cent) in investor relations.
“This could be due to big companies having greater market influence and facing greater investor scrutiny,” said the report, which was published on Thursday (Jun 27).
Titled Empowerment Through Engagement: Sparking Inclusive Conversations, the inaugural report examines the evolving landscape of stakeholder engagement practices among companies in Singapore.
It was put together by Black Sun Global, a stakeholder communications agency, and the Singapore Institute of Directors (SID), Singapore’s national association for company directors.
The report is also supported by the Securities Investors Association (Singapore), or Sias, and the Singapore Exchange.
How the study was done
For the study, 80 companies were qualitatively assessed on their stakeholder engagement practices through information gathered online.
The companies surveyed are ranked on the Singapore Governance and Transparency Index (SGTI), which evaluates corporate governance practices of Singapore-listed companies.
They also span across different market capitalisation sizes.
Twenty of the companies are at least S$1 billion in market cap, while another 20 are at least S$300 million to under S$1 billion in market cap. A further 20 are small-cap companies with a market capitalisation of under S$300 million, while the remaining 20 companies surveyed are the lowest scorers on the SGTI.
Public information such as annual reports, sustainability reports, company websites and social media were examined to determine the level and quality of stakeholder engagement with five specific stakeholder groups. They were the community, customers, employees, investors and suppliers.
In addition, an online survey was conducted in May 2024. More than 200 responses were gathered from aspiring and current board members and investors on their views on stakeholder engagement.
Other findings
The report found that many companies surveyed neglected to detail how their leadership handles stakeholder engagement plans and decisions.
For example, they did not disclose the roles and responsibilities of board members in relation to stakeholder engagement. There is also little information on how their boards manage stakeholder relationships.
The report also found that there is a “notable correlation” between companies exhibiting poor stakeholder engagement efforts and those that do not provide detailed insights into the leadership’s role in managing stakeholders, which the report said was crucial for building trust and accountability.
Furthermore, less than half, or 44 per cent, of companies surveyed conducted materiality assessments regularly or reported on the frequency of the assessments.
The report said that materiality assessments, which involve identifying issues that are significant to the business and its stakeholders, are a “vital step” to understanding the needs and concerns of stakeholders.
On the other hand, the report cited DBS as one of the companies that successfully demonstrated how their boards deal with major stakeholder decisions.
For example, the bank’s latest annual report highlights key activities by its board over the year. The annual report also highlights areas that are important to both the company and its stakeholders, such as sustainability and technology.
On stakeholders that they prioritised, survey respondents ranked investors (34 per cent) as the most important stakeholder for organisations, followed by customers (26 per cent) and employees (17 per cent).
However, industrial companies outperformed other sectors in employee engagement, scoring 58 per cent compared with those in the real estate (34 per cent) and financial (40 per cent) sectors. The report attributed the sector’s high score to health and safety being a key concern in industrial business operations.
It added that companies must enhance their communication strategies to effectively engage with material stakeholder groups regardless of industry or market size.
Meanwhile, large-cap companies were also more likely to engage suppliers in environmental, social, and labour practices as compared with small-cap companies.
Terence Quek, the chief executive officer of SID, said that the research highlights the growing need for organisations to genuinely consider stakeholder interests in their decision-making processes.
“By doing so, businesses can build stronger, more resilient relationships and drive sustainable success,” he added.
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