Sias’ questions to listed companies are a valuable resource for all investors

MANY observers said that properly educated investors are crucial in order for the Monetary Authority of Singapore’s Equity Market Development Programme to sustain its current positive momentum. To this end, there is a huge pool of learning resources, especially online, from which investors can draw – many of which are free and teach important investing concepts.

None, however, are company-specific and incorporate corporate governance considerations – except for the Securities Investors Association (Singapore)’s “Q&As on Listed Issuers’’.

These are based on questions sent to hundreds of listed companies ahead of their annual general meetings (AGMs) to guide shareholders on key issues that should be raised at those meetings.

They are not routine queries. They are pointed, disciplined and, at times, uncomfortable, and are based on three categories: financial performance, corporate strategy and governance. They cut through corporate spin and go straight to the issues that determine whether a company creates or destroys shareholder value. 

Consider this sample with company details omitted:

For two consecutive years, the company reported material discrepancies between its unaudited and audited financial statements. The adjustments spanned multiple areas, including expense classification, liability classification, related party balances, and presentation of cash-flow items.

Can the audit committee explain the root causes of these discrepancies, particularly in areas such as classification of liabilities and cash-flow presentation, and why these issues were not identified and resolved prior to the release of the unaudited results?

Profits have declined sharply over the past five years and no dividends have been paid during that period, yet executive remuneration has risen. What metrics are used to determine executive pay?

At the upcoming AGM, the company is seeking a significant rise in directors’ fees, citing the recommendation of an external remuneration consultant.

Can the board elaborate on how the consultant was appointed? Was a formal selection process conducted, including a request for proposal, and how was the independence and objectivity of the consultant assessed?

The company acquired a foreign business a few years ago, paying a substantial premium over its asset value. Yet, the business has not contributed meaningfully to revenue or generated appreciable returns. What was the rationale for the acquisition, and when does the board expect it to perform?

The company’s share price is now 80 per cent below its initial public offering level. Over the past five years, it has undertaken several placements and/or rights issues to raise capital, which appear to have generated poor returns, given its financial performance.

How does the board justify these in light of the severe dilution shareholders have endured?

Preparing for AGMs

Note that Sias’ questions go beyond headline numbers and routine announcements. They expose inconsistencies, highlight risks and, crucially, demand accountability. In short, they focus on issues that shareholders should raise at AGMs – but also educate readers on how to evaluate investment suitability.

One of the biggest barriers to effective investing is knowing what to look for and recognising that financial statements can be dense and corporate announcements are often framed in the best possible light.

By studying Sias’ questions, investors can gain a ready-made checklist of what really matters when picking companies in which to invest.

As AGM season gets under way, shareholders planning to attend should make full use of this valuable resource in preparing for those meetings.