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Shareholder activism a balancing act for Sias

Industry watchdog prefers the conciliatory approach to a confrontational one, says founder and CEO David Gerald

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Shareholder activism a balancing act for Sias HE standard of corporate governance has gone up over the years, on the back of new regulations introduced as well as initiatives by the Securities Investors Association Singapore (Sias) to drive home the need for transparency and accountability.

But there is still much more work to be done, said David Gerald, founder and CEO of Sias.

He pointed out: ''Prior to the formation of Sias in 1999, transparency and governance were not at the forefront of companies and investors.

''At that time, many investors did not have access to information easily; many were investing based on rumours and rarely analysing the annual reports.''

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The Sias Investors' Choice Awards was part of efforts to shine the limelight on companies that have fared well on the corporate governance front, in the hopes of encouraging others in the industry to do the same.

With the industry watchdog celebrating its 20th anniversary this year, it is also searching within to find out how it can step into the future.

This comes as Sias has been the target of much criticism over the years - among them for its oft-advocated collaborative approach of resolving issues ''in the boardroom and not the courtroom''.

Mr Gerald remains staunch in his belief that this model of activism works for Singapore.

''The activists' approach of the West does not work well in Asia - the confrontational approach does not open doors,'' he said. '''Face' is still very much an Asian trait.''

He raised the example of Isetan, where minority shareholders called for an extraordinary general meeting (EGM) in January 2007 to vote out and replace the independent directors and table resolutions on the distribution of tax credit and royalties.

According to him, ''tyranny of the majority'' prevailed as minority shareholders failed in their bid since Isetan Tokyo held a 61 per cent stake in the company.

What Sias did after the EGM was to contact the independent directors to arrange a meeting with the Japanese directors to highlight the plight of minority shareholders and to find a solution that would balance the interests of all the stakeholders.

Mr Gerald said that this approach was appreciated by the Japanese directors of Isetan, and they agreed to declare a final and special dividend of S$1.50 per share.

This demonstrates that a conciliatory approach rather than a confrontational one brings value to minority shareholders, he added.

He emphasised that the association is not a regulator, but an industry watchdog. ''We act more as a check and balance and work with the company to make improvements where necessary,'' he said.

''Shareholder complaints against companies that fall short in transparency and governance are taken up by Sias in the boardroom, as the first mode of action.''

Serious breaches of regulations will be reported to the Singapore Exchange, the Monetary Authority of Singapore (MAS) or the Commercial Affairs Department.

''We want results and not create dissent between the company and its shareholders, which achieves nothing,'' he said. The same goes for critics who are ''keyboard warriors''.

At the end of the day, Singapore's interests must come first, he said.

''It is important to always bear in mind that Singapore cannot afford disruption to its capital markets,'' he stressed. ''Companies must be allowed to pursue their businesses but the issues of the investors also cannot be compromised.''

He also refuted criticism that Sias' collaborative approach is slow and ineffective compared to other shareholder activism models elsewhere that entail the banging of tables and kicking of doors.

It has embarked on posing in-depth questions to listed companies on governance, business strategies, and financial statements, said Mr Gerald.

This is done before annual general meetings, enabling shareholders and investors to further probe companies.

Sias has covered almost 600 listed companies so far. Moving forward, it would cover all 700-plus of them, he said. He also rebuts sceptics who claim that the industry watchdog cannot be objective because of its traditional reliance on corporate funding.

''Sias has always been independent and played its role and never compromised its position,'' he said.

''Most of our donors and supporters understand and respect our role, and continue to support us despite Sias' queries.''

A few cases that he cited included Singapore Airlines on the delisting of Tiger Airways, and DBS on Longcheer Holdings.

Now, with the MAS stepping in to fund Sias, Mr Gerald said that this should ''remove any doubt'' of the watchdog's independence.

Despite the many naysayers and headwinds, Sias is staying true to its ethos, but in a way that enables it to become more up-to-date and effective.

The first has to do investor education - a topic close to Mr Gerald's heart. The association aims to do more programmes to educate investors on their rights, as well as to reach to more Singapore to help them grow their wealth through the use of technology.

It also wants to provide timely guidance to retail investors through equity research reports.

In the area of corporate governance, the watchdog is exploring extending its thought leadership through conferences and workshops overseas.

''With the funding issue now settled, Sias will now be able to expand its initiatives to be proactive in protecting minority investors by increasing our resources to track companies more closely,'' he said.

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