Singapore companies flagged for lagging ASEAN peers in transparency

    Corporate governance bodies highlight reluctance of companies to disclose information.


    Nikkei Asia, 14 May 2021

    SINGAPORE -- Singapore may be a prominent financial hub in Asia, but its publicly-listed companies are continually lagging behind their peers in Thailand and Malaysia on transparency issues, according to corporate governance bodies that have flagged the shortfalls.

    The Singapore Institute of Directors and the National University of Singapore's Centre for Governance, Institutions and Organisations on Tuesday highlighted the practice of company disclosures as a key area to be fixed if the city-state's publicly-listed firms were to improve.

    During an online briefing attended by members of the country's corporate sector, past Chairman of the SID, John Lim, noted that while Singapore companies had progressively scored higher points in corporate governance assessments over the years, they were still somewhat reluctant to release information about themselves.

    "In Singapore we have what we call a balanced ecosystem -- we have regulations and then we've got market practices," he said. "But here is a case where in fact [Singapore companies] have already implemented the practice, [but] what you're falling short on is just disclosure," Lim explained.

    Based on a Corporate Governance Scorecard of publicly listed firms in the Association of Southeast Asian Nations compiled by SID and NUS CGIO, Singapore trailed Thailand and Malaysia in the 2019 assessment -- which was the latest study, published late last year.

    Out of a maximum of 130 points, Thailand ranked first in the region with 96.6 points, followed by Malaysia with 95 points and Singapore with 88.3 points.
    The study assessed companies in areas of corporate governance, such as disclosure and transparency, responsibilities of boards of directors, and rights of shareholders.

    It found that in Singapore, only 20% of its top 100 publicly listed companies bothered to have a website disclosing up-to-date information on a firm's constitution, which would include its by-laws, memorandum and articles of association.

    Just 39% of the companies studied disclosed non-financial performance indicators in their annual reports, while merely 10% of them had set a limit of five seats on various boards of directors that an individual can hold simultaneously, which Lim pinpointed as another area for improvement.

    "Let's say if companies have actually implemented a limit of five [seats held by] board members for their non-executive directors -- Singapore has not yet done that," he noted. "But in Malaysia, actually there's a regulation already limiting the number of other listed companies, or the total number of listed companies that a director, non-executive director, can sit on," Lim said.

    He added that disclosure of salaries paid out in listed companies to top executives was another issue. "There are many companies that do not even disclose the salaries," Lim observed.

    "The reasons normally given are that this [information] is trade sensitive," he explained. "So that's the general sort of reaction that I have come across." Lim said.

    Singapore's reputation as Southeast Asia's leading financial hub has been tainted recently, following high-profile cases of companies running into trouble as a result of poor accountability or management practices, prompting criticism of the corporate governance standards maintained by company leaders in the city-state.

    In recent years, failings have plagued a number of public and private companies in the country. Singapore water treatment company Hyflux ran itself into debt and has been placed under judicial management by the city-state's High Court.

    Commodities group Noble Group came under the spotlight in 2015 for exploiting complex accounting standards in what some critics argued was fraud. Its shares were suspended from the Singapore stock exchange in 2018.

    Last year, Lim Oon Kuin, the billionaire founder of privately-held oil trader Hin Leong, admitted that he had directed his company's finance department not to disclose $800 million-worth of trading losses, and is currently facing a stack of charges in ongoing legal proceedings.

    The Singapore Exchange earlier this year tightened the rules for listed companies appointing auditors, as it moved to stave off a repeat of corporate governance lapses in the city-state.

    It is requiring companies that have their main public listing in Singapore to have an auditor registered with the Accounting and Corporate Regulatory Authority from January 2022, a change from previously allowing auditors from elsewhere. ACRA is the body which oversees business entities in the city-state.

    RegCo, the SGX's regulatory arm, will also require the appointment of a second auditor "in exceptional circumstances" -- if the authority believes that possible misstatements in a company's financial disclosures are pervasive but not evidenced by an incumbent auditor's opinion.

    Professor Lawrence Loh, director of the NUS CGIO, on Tuesday said that across separate studies he had seen, Singapore continually lagged some of its ASEAN peers in certain corporate benchmarks.

    One study carried out by retail investors lobby group Securities Investors Association Singapore and CGIO, and released in October last year, also noted the lower levels of transparency among SGX-listed companies relative to their peers in Thailand and Malaysia.

    "So there might be something beyond just corporate governance -- perhaps a social dimension, that might be, you know, hitting the companies," Loh said.

    "It is something that we need to unravel, but this is quite consistent across many types of study, beyond just corporate governance."