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DCS - going through the motions?
There is a widespread belief that the amending of SGX's Listing Rules to allow dual-class shares or DCS is a "done deal'', and that when a Consultation Paper is circulated on the subject sometime in the near future, it's only to give the appearance that the authorities are still undecided. "Going through the motions'' is a common phrase I've heard about a recent SGX-sponsored Roundtable on the subject and the upcoming Consult Paper; one industry observer said "it was a done deal from day One'' whilst another said "this is typical of the way things work here - they decide what they want first, then go through the rigmarole of asking for feedback to give the impression that the matter is still under consideration when it actually isn't''. It would be truly a shame if this was true.
Readers would by now be familiar with the issues, which boil down to commercial considerations on one side and good governance on the other. Supporters of DCS contend that with proper safeguards, shareholder rights can be protected. In any case, the market is so bad that allowing DCS here would simply add to the range of listing options on offer here. "Desperate times call for desperate measures'' was how one senior broker put it.
Governance experts however, disagree - and so do fund managers. Last Friday I interviewed Aberdeen Asset Mgt's head of corporate governance David Smith and the contents of that interview appear in today's BT. In a nutshell, I agree with David - don't allow DCS in the first place, but if it is decided that such companies have a place here, then don't bother with safeguards because listing aspirants will consider them too onerous and will likely just give SGX a miss. Furthermore, the market is full of creative people whose job is to overcome the rules and safeguards and it would be impossible to ensure all are watertight.
David also spoke of the game theory element at work, where everyone is waiting for everyone else to make the first move. So if SGX moves first to allow DCS, what will happen if HK, Malaysia, Korea etc all follow? Would there have been any value then in being the first mover?
It's certainly worth thinking about and I hope very much that when the Consult Paper is released, the issues are given serious consideration.