HAVING companies that display good corporate governance not only benefits the investment community at large, it also contributes to investors’ bottom line, said David Gerald, president and chief executive of Securities Investors Association (Singapore) (Sias).

This is especially true for the winners of Sias’ Singapore Corporate Governance award, which are likely to outperform and be more defensive than the Straits Times Index (STI) according to a study by Sias, Gerald said in his opening address at Sias Investors’ Choice Awards 2022 on Friday (Oct 7).

“While I have been asked why Sias conducts these awards, the result of our study is a testament to the impact we bring to helping investors invest better – in recognised, high-quality and well-governed companies,” he explained.

Sias had constructed a portfolio comprising winners of its Singapore Corporate Governance award and tracked its performance from Jan 10, 2008 to Sep 28, 2022. It concluded that the cumulative total return of the portfolio was 110 per cent, compared to the STI companies’ 59 per cent over the same period.

On a risk-adjusted return basis, the Sharpe ratio of the portfolio was 0.65, higher than the STI’s 0.25, and the portfolio’s beta of 0.94 also suggests that it is slightly more defensive. The portfolio, however, was slightly riskier than the STI, with a standard deviation of 17.85 compared to the STI’s 16.88, Gerald said.

“We are a body that exists to advance the interests of investors. Surely, this award exercise must be in their interests,” he added.

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The annual Sias awards, which is in its 23rd edition this year, recognises excellence in companies and individuals adopting good corporate governance and sustainability practices.

Apart from the findings, Gerald said Sias is looking to construct a model portfolio or an index comprising winners of the Sias awards in coming months.

“Companies should embrace the importance of practising transparency and corporate governance, as it has been shown that companies with good corporate governance practices are well-placed to withstand external shocks and perform better than those that don’t,” he said.

Gerald noted that the overall corporate governance scores of companies improved during the pandemic, with help from regulators.

However, he added that there is “still room for improvement” in areas including the independent external assessment of boards and directors, linking remuneration with risk management and key risk disclosures.

“While it is easy, in hindsight, to identify the causes of corporate failures, it is much harder before the fact. But would it not be better if shareholders and investors could foresee or better predict corporate issues or failures before they happen?”

Gerald said Sias will continue to explore ways to monitor companies, their performance indicators, and corporate governance to educate and bring relevant information to investors and help them navigate challenges in managing their investments.

The Sias Investors’ Choice Awards includes the Singapore Corporate Governance awards, Shareholder Communications Excellence awards, Financial Journalist awards, Best Retail Broker awards, and Most Transparent Company awards. This year, Sias also introduced the new Investors’ Choice Outstanding CEO awards.