Investing public must play a bigger role in corporate governance

IN the past two decades since the local financial market shifted to a disclosure-driven regulatory framework, regulators have had the unenviable task of deciding just how many rules should be dismantled and how many should be kept.

On the one hand, the notion that "less is more" is popular among those who opt for a minimalist approach and a lighter hand - one where the market delivers the necessary discipline through rewarding or penalising share prices. As the theory goes, well-run and transparent companies should receive the market's endorsement via superior share price performance, while opaque and poorly-managed firms will see their shares languish. Proponents of such a market-based regime also point out that too many regulations place unnecessary financial burden on companies via high compliance cost and hampers attempts to attract new listings.

Conversely, those who prefer a tighter regulatory hand argue that it is better to have a market that is well-governed with a strong disciplinary framework that looks to enforce a level playing field for all participants because it is only when all investors are confident that the system will look after their interests can any market truly thrive. Under such a regime, more regulation is needed - especially when targeted at protecting retail investors.