Investor protection has not improved in Singapore: Mak Yuen Teen

MORE than two decades after the Singapore stock exchange was corporatised and listed as the Singapore Exchange in 1999, investor protection in the financial hub remains low, said corporate governance advocate Professor Mak Yuen Teen.

That is because capital market regulation and enforcement in Singapore tends to be tilted towards business interests, over the interests of their investors, employees and consumers.

“It could be resourcing, it could be we haven’t set up the regulatory framework the right way. Is the division of responsibility between SGX RegCo (Singapore Exchange Regulation) and MAS (Monetary Authority of Singapore) correct?” said Prof Mak in a recent interview with The Business Times.

While he says that regulators have stepped up enforcement actions over the last two to three years, there is still no real improvement in investors’ ability to protect themselves by exercising their rights to seek recourse when companies and their board of directors fail to carry out their duties.

“As the stock exchange got listed and attracted more companies, I think the quality is declining. And at the same time, our investor protection and corporate governance enforcement haven’t really kept up.”

This is why he decided to take up the opportunity to head a new research centre that looks at investor protection at the National University of Singapore Business School, where he is also an accounting professor, after a sizable donation was made to the university.

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With a focus on how polices and practices relating to investor protection can be improved, Prof Mak will be launching a comparative study on investor protection mechanisms and innovations across various capital markets as one of his first major projects as the centre’s founding director.

His leadership of this new centre comes almost 30 years after he was first thrust into the world of corporate governance by chance.

He had returned to Singapore after completing his higher education studies in 1996 and in the thick of the Asian Financial Crisis the very next year, the World Bank was looking for someone to assess whether corporate governance was a contributing factor to the region’s economic crisis. Soon after, he was asked to join Singapore’s corporate governance committee, set up at the end of 1999.

Prof Mak has made a name for himself since then as the corporate governance firebrand who does not mince his words when reprimanding companies and capital market regulators.

He has received half a dozen or so legal letters over his public comments, but Prof Mak said most did not amount to any real legal or financial threat.

“You can’t make a difference if you are not prepared to take the risk. If you are so fearful of what will happen to you if you say something, I won’t be doing corporate governance. I think corporate governance is inherently controversial. It will stir emotions,” he added.

What has kept Prof Mak continually advocating for better corporate governance practices in Singapore is partly the values passed down from his mother.

“She was always thinking about how her actions impact others... It’s so important that people running companies think about how their actions impact others and why, especially those who can’t look after themselves, the minorities, the small players, who is going to help them and fight for their interests?”

He added: “Corporate governance is really about making sure that companies treat stakeholders fairly.”

Company directors in Singapore have not become more accountable towards their shareholders and do not share the same respect or fear of regulators here than compared with their counterparts in Malaysia, according to Prof Mak.

That could be because the securities commission in Malaysia is the authority that approves company listings, and not Bursa Malaysia, the bourse operator.

A very high level of scrutiny is seen among companies looking to list in Hong Kong, from both the stock exchange and the city’s securities regulator.

“Should more decisions actually be moved to the securities regulator? And in fact, the further question which have been raised right, should there be a separate securities regulator?”

That being said, directors that have exercised their due diligence but still made a poor business judgement which caused losses for the company should not be subjected to penalties, Prof Mak said.

But capital market regulators are always walking a tightrope in their attempts to ensure that sufficient investor protection does not lead to overly burdensome compliance costs for companies.

The professor said that companies looking to list in Singapore need to understand that investor protection is the cornerstone of good capital markets. They also need to know what to expect as a listed company, and that is to be subjected to enforcement actions if the directors do not exercise their duties.

“Because otherwise, you will just end up having companies just listing or the wrong reasons, and not behaving properly. And then, that just does long-term harm. So I don’t think we have struck that balance right.

“I am not saying we should bring in full contingency fee class action suits like in the United States... But while we have moved to a disclosure-based regime (like in the US), we didn’t put in the checks and balance, we don’t have the regulatory framework to support a disclosure-based regime,” he added.

Taking on the helm of this new centre at 63 years old, and after close to three decades of corporate governance work, Prof Mak said that retirement is overrated and that he still feels passionate and energetic.

His hope for the new centre is that its research output will eventually bring back investor confidence and improve the capital market in Singapore.

“Why am I doing this? Basically, at the end of the day, I just want the Singapore market to do better.”