Malaysian companies lead in corporate disclosure practices in Asia

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NOVEMBER 28, 2019 - 4:43 PM

MALAYSIAN companies lead in corporate disclosure practices in Asia, followed by India and Singapore, according to FTI Consulting.

Companies publicly listed in Malaysia achieve an average composite disclosure score of 8 out of a maximum of 10, while Indian and Singaporean companies share the second place with a score of 7.3 on the Asia Disclosure Index 2019 conducted by FTI Consulting.

When zooming into specific regions, India leads with an average score of 7.3 out of 10, while ASEAN and Hong Kong managed to respectively score 6 and 5.7 on average.

India performs well in board composition and risk disclosure. 89 per cent of Indian companies provide whistleblowing mechanisms and an equal number of companies provide risk metrics and mitigation information in their annual reports.

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Within ASEAN, there is significant variation on the scores, specifically between Malaysian, Singaporean and Thai companies as the top half; and Indonesian, Filipino and Vietnamese companies as the bottom half. FTI Consulting highlights Vietnamese companies’ failure to provide annual reports in English, which exacerbates corporate opaqueness and deters global investors.

In Hong Kong, 82 per cent of companies provide sustainability information with Global Reporting Initiative (GRI) standards or other internationally recognised benchmarks, as compared to 71 per cent in ASEAN and 57 per cent in India.

However, Hong Kong is weighed down by a general lack of independent directors on the board and whistleblowing mechanisms.

Looking at disclosure practices by sectors, companies from the IT/technology and telecommunications and banks/financials sectors lead in disclosure practices, thanks to the international nature of both sectors and their need for activity engagement with strategic partners and investors in developed or mature markets.

Conversely, the primarily local focus of the food and beverage/agribusiness and real estate/construction sectors likely explains for the low disclosure scores in both industries.

In general, companies from eight jurisdictions in Asia score well on corporate disclosure, with an average voluntary disclosure score of 6.4 out of 10 and an average board quality score of 2.4 out of a maximum of 4. 

Of particular interest is that around 80 per cent of companies from ASEAN, Hong Kong and India have at least one female director on their boards. 

However, many companies could improve their risk disclosure standards, with an average risk disclosure score of 3 out of a maximum of 5 for all 330 companies.

While 71 per cent of the companies reviewed  provide some information on risk metrics and mitigation, 45 per cent of them do not provide any information regarding cybersecurity or data-security risk mitigation in their annual reports.

Meanwhile, 32 per cent provide sustainability reports without internationally recognised benchmarks such as GRI standards. Further, 36 per cent do not provide a convenient whistleblowing mechanism that is mentioned on their websites or in annual reports. 

Out of all 330 companies, only 23 are classified as corporate disclosure champions, with a full composite disclosure score. Nine of these companies are from Malaysia, five are from India, four are from Singapore, three are from Thailand and one each is from Hong Kong and the Philippines. 10 out of the 23 companies are from the banking/financial services sector, five are from the industrials/manufacturing/transport sector and three are from the energy/resources sector.