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Corporate governance and leadership

Business leaders share their views and experiences on issues ranging from shareholder activism to board diversity and governance standards

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"Leaders used to be autocratic and insistent on forcing through with decisions regardless of any opposing opinions. Modern leaders are receptive to suggestions and advice, and play the role of enablers in encouraging those around them to contribute positively." - Narayanan Sreenivasan

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"Ultimately, organisations must strike the right balance between top-down and bottom-up management. The key in this leadership role lies in leaders listening to, interacting with, empowering, and developing followers." - Yeo Hock Leng

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"In the next five years, we can expect to see shareholders and stakeholders putting their newfound democratic power to good use – perhaps in the influencing of corporate strategies and decisions." - Wong Teek Son

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"With change being the only constant, leaders must be nimble and have the propensity to adapt to prevailing industry trends in order to ensure the best outcomes for their organisations." - Khoo Boo Hor

Roundtable participants:

  • Narayanan Sreenivasan,
    non-executive independent chairman,
    Q & M Dental Group (Singapore) Ltd
  • Yeo Hock Leng,
    executive chairman and group managing director,
    Dynamic Colours Ltd
  • Wong Teek Son,
    executive chairman and chief executive officer (CEO),
    Riverstone Holdings Ltd
  • Khoo Boo Hor,
    CEO and executive director,
    Sunningdale Tech Ltd

Moderator: Tan Jia Hui,
The Business Times


Question: What do you think led to the rising shareholder activism in Singapore in recent times and how far do you think this will go to improve corporate governance here?

Narayanan Sreenivasan: Some contributing factors to the rising shareholder activism include the increasing sophistication of investors in Singapore, and the improving visibility of Singapore-listed companies internationally, which thereby attracts a more global base of investors.

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Recent changes such as the mandating of poll voting and the reduction of the minimum lot size for Singapore Exchange or SGX-listed shares from 1,000 to 100, make it more viable for a greater pool of potential investors to buy into companies and be involved in the annual general meetings (AGMs).

Corporate governance will improve when the shareholders have taken a serious look at the company's financials, future plans, and prospects, and are campaigning for changes to improve the company's potential.

However, if the activism is to achieve a short-term share price increase at the expense of long-term business values, such activism might be detrimental, especially if the campaigning shareholder is looking for a quick exit after the short-term gain.

Yeo Hock Leng: The rise in shareholder activism in Singapore is in line with such activism in Japan, South Korea, Hong Kong and the rest of Asia. American and other foreign capital (including those from hedge funds) are flowing in and such shareholders are becoming increasingly less tolerant of underperformance by companies.

Individual activists and local investors are cooperating with them to demand or negotiate with boards to extract better governance and economic performance for all shareholders.

Companies with greater stakeholder involvement tend to promote greater ethical, responsible and transparent behaviour under the rising Environmental, Social and Governance (ESG) movement. Effective and continual consultation with all stakeholders is an essential element in bringing about better corporate governance and better economic performance.

Wong Teek Son: First, well-educated shareholders are typically more sophisticated and aware of their rights and therefore more likely to take a crusading stance on equitable treatment (especially of minority shareholders) and the enhancement of shareholder value.

Second, the surge in the usage of social media platforms has provided the impetus for the organisation and mobilisation of shareholders. In the past, grassroots shareholder campaigns encountered the difficulty of disseminating their message due to the high cost of employing mass-media tools and the intricate legalities that surround public demonstrations in Singapore.

Social media platforms, such as Twitter, Facebook, and other public forums, offer a new (and mostly free-of-charge) avenue for disgruntled shareholders to opine their dissatisfaction, and engage other shareholders with similar woes, in the hope of precipitating a change. The best part is that the majority of the aforementioned steps can be accomplished without the need for a physical meeting.

I believe that with the support of the SGX, rising shareholder activism can make great strides in the improvement of corporate governance in Singapore. Faced with prospects of enduring costly lawsuits and the negative publicity engendered by a social media saga, public companies will have to invest in greater efforts to satisfy their shareholders with increased transparency, accountability, and improved corporate governance.

Khoo Boo Hor: While a myriad of factors have contributed to the rise in shareholder activism, I like to attribute it to the increasing sophistication of shareholders given Singapore's transformation into a key financial hub in the region.

Backed by initiatives from various organisations, the level of education among the investment community has improved significantly.

Overall, rising shareholder activism has gone a long way in improving the corporate governance landscape in Singapore. Shareholders have benefited from higher levels of transparency and accountability.

Question: Women's participation in corporate boards has been very low. Should we mandate that there be a minimum level of female participation?

Mr Sreenivasan: This may potentially lead to unsuitable candidates sitting on the board for the sake of compliance, especially in sectors where there are traditionally less female participation. We believe that nominating committees should be alert to actively identify suitable female directors rather than restricting themselves to the usual pool of associates.

Mr Yeo: A mandate could be used as a short-term strategy in resolving the ratio in corporate boards. But this may result in companies paying lip service in diversifying their ranks.

Companies can make diversity an explicit focus in their corporate culture, by providing more participation opportunities for women across all levels of hierarchy and functions.

In addition, development of female talent can be emphasised through mentorship or professional development programmes. While the enforcement of a mandate might not provide true results in board diversity, change in corporate culture will.

Mr Wong: While the regulatory board should continue to encourage female participation in corporate boards, I do not believe that there should be a minimum level of female participation. By installing a quota system, the appointment of female board members may be construed as window dressing, and may also potentially diminish the credibility of the appointed female board members.

Mr Khoo: I believe it is always beneficial to have a well-diversified board in areas including profession, management experience, industry knowledge and gender. This ensures that board members possess the necessary competencies and skills to lead and govern a company effectively.

Question: What are the three key factors that help ensure proper governance and how regularly do you review the corporate governance standards?

Mr Sreenivasan: First, the board and management must keep up to date with the constantly increasing compliance requirements. Second, the board must ensure that it is kept abreast of developments in the company with regular communication between the board and management. Third, each board member must perform his or her duty unaffected by internal and/or external influences, and use his or her own set of skills and experience to contribute to the company.

Mr Yeo: The first key is in placing a strong emphasis on building a good corporate culture. Culture and values must be shared and communicated not only in the mind of a manager who is responsible, but across the whole firm. The firm has to build and maintain an effective governance infrastructure by setting in place specific policies that guide organisational behaviour.

The second key is to evaluate performance and pursue opportunities for improvement. Monitoring organisational performance is an essential board function and there should be an established format for reports. By identifying the key performance drivers, appropriate measures can be agreed upon for determining proper governance.

The third key is having the right composition and competencies of board members. Boards should be aware of their strengths and weaknesses if they are to govern effectively. Director skills, competencies and board relationships are contributing factors to effective governance.

In practice, the company reviews the corporate governance practices on a quarterly basis at board level, and continuously in the minds of every director and manager once the right corporate culture and attitudes have been ingrained. This must apply not only within the organisation but also in the way the organisation uses all the above three keys in interacting with all stakeholders.

Mr Wong: In my opinion, the three key factors are transparency, accountability, and fairness. Transparency means we have to actively inform our shareholders about our corporate activities, outlook, and risks. Accountability implies that we are responsible for justifying all our actions and conduct in the name of our company.

Lastly, fairness refers to the equal and equitable treatment of all our shareholders, regardless of the proportion of their shareholdings. In order to maintain shareholders’ confidence, we review our corporate governance standards on a half-yearly basis.

Mr Khoo: Fairness, accountability and transparency are three core principles we uphold in ensuring the highest standards of corporate governance. It is imperative that a board is fair to all shareholders through timely and balanced disclosure of all material matters while encouraging shareholder participation through effective communications policies at general meetings. With regards to accountability, it is essential for a board to employ adequate internal controls that will ensure members are held accountable for the business decisions pertaining to a company’s operations.

Finally, transparency is the cornerstone of an effective corporate governance structure. A board should be committed to providing shareholders with sufficient information pertaining to changes in business operations which could have a material impact on a company’s share price.

Question: How have leadership roles changed over the previous few years and how do you see them changing in the next five years?

Mr Sreenivasan: Leaders used to be autocratic and insistent on forcing through with decisions regardless of any opposing opinions. Modern leaders are receptive to suggestions and advice, and play the role of enablers in encouraging those around them to contribute positively.

Mr Yeo: In the past, leadership roles could be oriented from a top-down approach. Among other leadership styles, task-oriented and people-oriented leaders could perform well in most situations.

These leadership roles have changed over recent years and are moving towards a defined bottom-up approach. Ultimately, organisations must strike the right balance between top-down and bottom-up management.

The key in this leadership role lies in leaders listening to, interacting with, empowering, and developing followers. In addition, more individuals are seeking greater autonomy over how they control their resources such as time, and thus they seek to be empowered in scheduling their own work with flexible hours.

In the coming years, leadership roles may require greater engagement through human touch and motivation due to greater dependence on technologies such as cloud computing and de-centralised work spaces.

Mr Wong: Previously, leaders were perceived to be more autocratic and part of an inherently hierarchical system. They were deemed as the creators of the corporate vision, while other stakeholders and shareholders were simply expected to adopt their strategies without question.

However, with the rise of social media, stakeholders and shareholders are now more empowered to voice their opinions – sometimes collectively – on online platforms.

Thus the power distance between leaders and followers is gradually diminishing while democracy (particularly among shareholders) is enhanced.

In the next five years, we can expect to see shareholders and stakeholders putting this newfound democratic power to good use – perhaps in the influencing of corporate strategies and decisions.

Mr Khoo: In today’s rapidly evolving business landscape, technology has changed the dynamics of effective leadership. Undoubtedly, the rise of technology has transformed the ways in which we work, communicate, and manage our employees. With change being the only constant, leaders must be nimble and have the propensity to adapt to prevailing industry trends in order to ensure the best outcomes for their organisations.

Looking ahead, leaders will still be defined by their ability to inspire, and motivate employees to accomplish more than they otherwise would.

Question: Can you share a crisis that you had to face and how you overcame it?

Mr Sreenivasan: We have not faced any serious crisis. Early identification of brewing issues, quick updating of the board, utilisation of board and external resources in dealing with the problem, and decisive action have helped us avoid crises.

Mr Yeo: The company overcame an operational crisis back in 2010-2013. It was a really challenging time although the group remained profitable. Our resilience and adaptability resulted in an ensuing resumption of earnings growth. On the labour front, it was difficult for the Singapore operations to attract workers owing to a tightening of foreign worker permits and surge in foreign levies.

On the energy front, our electricity costs rose significantly due to new tariff schedules.

These two factors brought down gross margins in Singapore. After evaluating various factors, the company made a brave yet painful decision to relocate the manufacturing base for a major product division to a lower cost environment in a neighbouring country. The process was not easy but we are fortunate that the company’s earnings rebounded after the relocation.

Mr Wong: Following the financial crisis of 2007–2008, the semi-conductor industry took a hit and in turn, adversely affected the demand for our cleanroom gloves. Faced with the suddenly freed-up capacity, we had to devise a strategy to stay afloat in this business.

After sufficient rounds of discussion among the board members and key stakeholders, we decided to commence with the production of healthcare gloves. The new healthcare segment did not only consume the excess capacity, but is also more resistant to macroeconomic conditions. Given that we were able to swiftly recover from the financial crisis, and that our utilisation rate for the past few years has consistently been above 90 per cent, we believe that we have made the right move as a result of the board’s collective vision.

Mr Khoo: Following the global financial crisis, 2009 was a challenging year. We experienced a slowdown of customers’ orders and a shorter forecast window was given by customers. This was especially acute in the automotive industry. However, even in an economic downturn, there are opportunities and we found them as some projects were transferred over from competitors who were not able to operate due to a lack of financing.

We also made a bold move with a contrarian decision to expand our capacity during a year of crisis. This boded well for us as we achieved a record level of revenue in the following year, while further diversifying our business across new geographic locations.

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