Singtel, CapitaLand Mall Trust top corporate governance rankings again

SINGAPORE'S most well-governed and transparent listed companies were unveiled on Monday, with Singtel topping the annual Singapore Governance and Transparency Index (SGTI) ranking in the general category for the fourth consecutive year, and CapitaLand Mall Trust leading the real estate investment trust (Reit) and business trust category for the second year.

Singtel retained its pole position with 129 points for SGTI 2018, while DBS Group ranked a close second at 124 points. CapitaLand and Singapore Exchange tied at third position. United Overseas Bank made it to the top 10 at eighth place for the first time, while Singapore Press Holdings placed ninth spot after an eight-year hiatus in the top 10.

In the Reit and business trust category, CapitaLand Mall Trust and CapitaLand Commercial Trust took the top two positions, while Ascott Residence Trust ranked third.

This year's index ranked a total of 589 Singapore-listed companies and 43 Reits and business trusts that released their annual reports by May 31. The SGTI assesses companies on their corporate governance disclosure and practices, as well as the timeliness, accessibility and transparency of their financial results announcements.

CPA Australia, NUS Business School's Centre for Governance, Institutions and Organisations (CGIO) and Singapore Institute of Directors (SID) announced the highest scores recorded in the SGTI at the Singapore Governance & Transparency Forum 2018, where deputy managing director (financial supervision) Ong Chong Tee of the Monetary Authority of Singapore (MAS) was guest of honour.

Mr Ong said in his keynote address that a knee-jerk tightening of rules may not be in the best interest of the market, as tighter across-the-board regulations can impose additional costs on all listed companies.

"These costs must be weighed against the benefits. It may not be appropriate to prescribe the same standard on all companies, as they can differ in size or business complexity. The MAS has therefore been deliberate in calibrating our rules. For example, there are more stringent corporate governance (CG) standards for banks, compared to for other listed companies, and rightly so due to banks' potential systemic impact.

"This is also why in the latest review of the Code, the council took a pragmatic approach. Important baseline market practices that should apply to every firm - or CG 'hygiene' requirements - are hardened by their inclusion in the SGX (Singapore Exchange) Listing Rules. Indeed, 12 basic requirements previously couched as guidelines have been shifted from the Code to the Listing Rules. In other aspects, the Code has been streamlined and elaborated in the practice guidance."

The SGX had earlier in the morning said it will make amendments to its listing rules following the MAS's acceptance of a slew of recommendations to encourage board renewal and diversity as well as strengthen director independence.

In his speech, Mr Ong pointed out that companies that fall short in their CG practices will hurt investor confidence. Failings in larger institutions can also undermine system-wide financial stability. There have been recent public commentaries on companies flagged for corporate transgressions. Some reports are accompanied by calls for more forceful regulatory actions, or further tightening of CG standards.

"So each time a corporate failing of one form or another happens, both the MAS and the SGX would review and investigate the matter. The specific regulatory response would obviously depend on the facts and circumstances of each case.

"There may be some concerns that some of the principles in the Code are subject to interpretation and gaming. I can understand such sentiments. This is why the MAS has also accepted the (Corporate Governance Council's) recommendation to set up a standing Corporate Governance Advisory Committee to monitor CG developments on a regular basis..."

At the same time, there are other views calling on regulators to adopt quicker or harsher actions in response to CG violations. Some felt that directors should be held more accountable for their fiduciary duties, or breaches in their fiduciary duties.

Mr Ong said that investigations are usually complex and time-consuming affairs especially if there are cross-border elements involved. "At the same time, it is important that our financial sector operates with a clear rule of law, as well as fair and transparent legal processes. This is to assure a trusted regime for everyone. We must allow for thorough investigations as a matter of legal and investigation integrity. There is often a web of details to be ascertained in each case of possible misconduct. Any premature updates to the public can also compromise investigations. In such situations, regulators would avoid alerting suspects who are under investigation at the outset, so as not to prejudice the investigations, in the process of evidence gathering."

But he noted that enforcement actions cannot operate in isolation.

"No amount of rules can stop someone who is intent on gaming the system or breaking the law," he said.

This is where market discipline - where market participants themselves exercise oversight over companies and call out what may be possible transgressions or dubious practices - becomes important.

"As our capital markets develop, we can and should expect market discipline to increasingly feature... The fact that we have indeed seen more of such commentaries and reports in recent years need not be interpreted as a sign of weakness but of strength arising from a more mature capital marketplace. For market discipline to work, it is essential that companies provide relevant and meaningful disclosures."

He added that investors can also play an important role by scrutinising disclosures and providing relevant feedback to companies where boilerplate disclosures are ambiguous or unhelpful. Companies must similarly play their part to engage their stakeholders proactively, and avoid taking an overly-legalistic approach in their dealings with shareholder queries as that can only engender distrust.

Rather, they can have more regular dialogues with their investors to facilitate understanding with their investors, and to build a strong relationship based on openness and mutual respect. While they respect the rights of all shareholders, investors should also engage companies in a constructive manner, and avoid unfounded allegations or speculative attacks.

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