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Sias raises ambitions on investor education
AWARDS can be given and scores can be ranked, but how much corporate governance matters and its quality will ultimately be determined by investors.
The Securities Investors Association of Singapore (Sias) has therefore placed investor education as a key priority in its future plans by increasing the scope of its financial education programmes to include more than just trading and analysis, and by an ambitious plan to carry out company-specific scrutiny.
"We have been concentrating our efforts largely on investor education, because we believe our mission is to educate the ordinary citizens to help them grow their money," Sias president David Gerald told The Business Times.
Sias, a retail investor advocacy group, organised its 16th Investors' Choice Awards this year to recognise companies, boards of directors, brokerages and financial journalists who have excelled in practising or advancing corporate governance and transparency. The quality of the nominees has been improving every year, Mr Gerald said.
"Tremendous improvement," he emphasised. "And many are very keen to win awards. Therefore they're upping their game, not just for the awards, but so that they can tell institutional investors, high net worth investors that they are good at corporate governance. An award from an investors' body means a lot more than from any other body in Singapore, because we are the people who put money into the company, we are the ones who want good governance so that our money will be safe."
Mr Gerald highlighted a number of areas that stood out. Executive remuneration disclosure rates remain low but are improving. The quality of shareholder-meeting minutes needs to be more informative by sharing details such as questions that were asked and vote-counting methods.
The timing of annual general meetings (AGMs) also continues to show bunching, and companies can help shareholders to address the problem by better minutes and by providing online broadcasts and recordings of the meetings, he added.
"Generally the independence on the boards is improving, and the process of selection is also getting better," Mr Gerald said. "There is willingness to report the CEO's salary, I think a few more companies are coming on board. . . and I think generally there is an attitude in listed companies' boards to improve transparency and governance."
But while companies and directors are improving, what of the people on the other side of the investment equation - the investors? Have they become better consumers, as it were, of corporate governance?
The signs are encouraging to Mr Gerald.
"Many chairmen tell me that they have noticed a marked improvement in the type of questions being asked," Mr Gerald said.
For its part, Sias has long tried to raise the bar among investors by running education programmes that explain annual reports and stock investment fundamentals, for example. But Mr Gerald believes that the scope of those programmes should be widened to take a more holistic view of investing.
The organisation has been running programmes in Singapore's heartlands in collaboration with local communities that take a broader look at investing fundamentals, covering concepts such as risk assessments, budgeting and discussions about different types of investment products beyond stocks.
"The bottom line is helping families to improve their financial well-being," Mr Gerald said. "I have seen enough misery. And therefore we felt that empowering Singaporeans with knowledge is the most important thing when it comes to investing. Investing without knowledge is gambling. It's like the casino. Even at the casino you have to put a hundred dollars down. But it seems for the Singapore market you can go in without any money on contra trading. And quite a lot of them have lost money."
That is not to say that the more technical aspects of investing are being pushed to the sidelines.
"When we tell them to invest in listed companies in Singapore, many have had bad experiences with S-chips (China-based companies) and also with some mid and small-cap Singaporean companies too," Mr Gerald said. "Now, it is good to teach them the principles of investing, how to know your own risk profile, how to manage risks, but it is also important for them to learn how to analyse a company. Because when it comes to risk management, it is important to know who is managing, what is their background, what is the business of the company, how long has the business been around and how has it been faring - the past three years is the benchmark - and then looking forward, what are the strategies, what are the markets?
"They have to behave like owners and not like gamblers."
But nothing beats an experienced and learned eye, and retail investors often benefit from expert analysis, Mr Gerald said. Sias is therefore hoping to start an initiative where expert analysts study companies and, for each company being researched, highlight three issues that shareholders should raise at the next annual general meeting.
"It would help our capital markets and companies to be better accountable and shareholders to know companies better if Sias can pose three minimum questions on every annual report," Mr Gerald said. "If we can have a group of analysts who can consistently help investors to focus on the right areas and ask relevant and pertinent questions, corporate governance in Singapore-listed companies will fly."
It is an idea that those who know of Sias's history will find familiar. The group had a research outfit from 2004 until 2013, when the research arm split away to become what is now Voyage Research in order to charge more for early access to its reports.
The difference is that the new initiative is not envisioned to be a traditional stock research house putting out full-fledged reports with trading recommendations and price targets. Rather, the new idea is to, at a minimum, simply raise issues and questions for shareholders to take before their companies.
"The investors need to be guided, and they need to be helped to focus, and help the boards with questions that the boards can answer and know where the concerns of the shareholders are," Mr Gerald said.
Mr Gerald hopes there will be enough financial support from donors and members to begin the programme. He estimates that if he can raise about S$1 million a year, Sias can have a research team to sustain the initiative.
"We have now decided that we should be a charity with IPC (institution of public character) status, so that we can go to donors who are willing to see our mission is an important one, who are willing to see that we are doing something good for Singapore by helping our citizens to uplift their financial well-being through investing," Mr Gerald said.
However much Sias offers to investors in terms of education and research, the task will eventually still fall upon investors to apply their knowledge. On that front, Mr Gerald is hoping for a cultural maturation among retail investors.
Retail investors must firstly be aware of their rights as shareholders and be willing to enforce those rights. When it comes to electing directors, investors must do their due diligence and ask questions about the nominees' experience, their intentions, and the selection process, for example. And when minority shareholders are denied their rights by management or directors or majority shareholders, then they must unite.
"Retail investors must know that you have the power collectively, and this is what Sias is about," Mr Gerald said. "Retail investors have a powerful voice in Sias. We have not had a single company say they will not meet with Sias."
But shareholder activism should also be carried out in responsible ways, with shareholders discussing meaningful issues, Mr Gerald added.
"Food at AGMs is not a right, it's a privilege," he quipped.
Investors need to understand their roles as owners of the companies whose shares they hold.
"You are the owner of a company when you invest in a listed company, and the owner of a company has certain rights," Mr Gerald said. "And they must exercise it. They must go for meetings, they must study the annual reports, they must ask questions, they must evaluate."