22 December 2018
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09 June 2018
No-small-gift policy, please

18 May 2018
KL mayor should be elected



21 September 2013 / The Star

We are now back into a market environment of volatility; capital is taking flight from stock markets worldwide, and it is only those companies which are stable, have consistent cash flows and have transparent management will retain stability and favour with investors.

The last factor, corporate transparency, is what astute investors will focus on in particular when they decide on where they should allocate their assets.

Similarly, and more than ever, such investors will also look to see if a country is practising sound and clear economic policies before they put money into it. In a time of weak currencies, current account deficits and ever-looming inflation, international fund managers will focus only on those countries that are making headway to protect the rights of institutional investors.

Two Asean countries are showing the way in this, namely Singapore and Indonesia.

Let’s take a look at our neighbour across the Causeway first. On July 31, 2013, the Singapore Stock Exchange (SGX) announced that it had amended its listing rules relating to annual general meetings (AGMs) to require, among other things, that shareholders at AGMs vote by secret ballot, and not by the usual show of hands.

From Jan 1, 2014, all companies listed in Singapore will also have to hold their AGMs in Singapore. This rule also applies to Singapore-listed trusts. There are exceptions to this location-specific rule. For example, the Singapore-listed company need not hold its AGM in Singapore if the laws of the country in which it was incorporated prevents it from doing so. Such a company would also be exempted from complying with the amended rule if, say, most of its shareholders lived outside Singapore.

Do note, however, that a company trying to exempt itself from the meet-in-Singapore rule will have to consult SGX first to see if it can claim to be an exception. SGX will also consider such pleas for exemption on a case-by-case basis.

Here are the other changes that SGX made recently to AGM proceedings:

1. From Aug 1, 2015, shareholders of Singapore-listed companies will have to vote by poll, and not just a show of hands as is currently practised. Also, a company will have to appoint at least one independent scrutineer to see that the entire polling process is done satisfactorily. Most importantly, the SGX rule empowers the scrutineer to direct and supervise the counting of votes cast in person as well as by proxy.

2. At the same time, the SGX amendments now require Singapore-listed companies and trusts to announce the polling results immediately after each AGM, and before the pre-opening session of the following trading day. These companies will also have to give shareholders details of the polling results, including:

– A breakdown of all valid votes cast;

– Personal particulars of all parties who had to abstain from voting on any resolution; and

– The name of the independent scrutineer.

The other Asean country who realises the importance of corporate governance and transparency in the marketplace is Indonesia. Its stock exchange, IDX, has even invited international fund managers to have a dialogue with it on how to go forward in the interests of all shareholders.

Among other things, Indonesia has asked the investment community to comment on its Indonesian Corporate Governance Roadmap. The country’s companies do have a few key challenges en route to better governance, including the lack of full voting by poll as well as non-disclosure of voting results to the public.

Global investors, especially those who vote by proxy and are not privy to the voting results, have red-flagged the non-disclosure of voting results as a grave concern.

As it stands, most companies usually only publish a summary statement of resolutions passed and what the subject matter of each resolution was.

We think, however, that the above challenges will not be too difficult for Indonesia to resolve.

It has become increasingly common in Asia for companies to count all votes cast at AGMs, be it by shareholders in person or by proxy, and to make all detailed voting results public, such as how many voted for or against, and how many abstained from the poll. These results are usually published two days after the AGM is held, at the very latest.

Hopefully, IDX will respond quickly to calls for changes to existing practices, and not take years to do so, as we have witnessed in other countries. It is, after all, ultimately in the interest of market regulators to bring about an informed and transparent voting system at AGMs.

They need only look to their nearest neighbour, SGX, for a forward-looking initiative to promote greater transparency at AGMs and to help listed companies and trusts engage more meaningfully with their shareholders. Regular communication and engagement with shareholders are crucial components of building good and sustainable corporate governance practices.