Singapore Stewardship Code expected to be launched by year-end
An industry working group could launch Singapore's first
Stewardship Code by the end of the year, laying out how investors should use their
powers as shareholders, according to Hans Cristoph-Hirt, co-head of Hermes
Equity Ownership Services.
Comments
Code typically lays out how investors should use their powers as shareholders
Kenneth Lim
13 September 2016
An industry working group could launch Singapore's first Stewardship Code by the end of the year, laying out how investors should use their powers as shareholders, according to Hans Cristoph-Hirt, co-head of Hermes Equity Ownership Services.
"So-called stewardship codes for institutional investors have been adopted in many markets around the world, including Japan, Malaysia, Hong Kong and Taiwan," he said via e-mail. "We have contributed to the development of stewardship principles for investors in Singapore. They are due to be launched later this year."
The working group - which includes the Stewardship Asia Centre, the Singapore Institute of Directors (SID), the Investment Management Association of Singapore (Imas) and the Securities Investors Association of Singapore (Sias) - has been working on the Code for at least a year, according to Imas's annual report published in October 2015.
"This industry-led initiative aims to enhance the quality of engagement between investors and investee companies to further the long-term interest of all stakeholders," Imas reported. "The Singapore Stewardship Code also serves as a complement to the Code of Corporate Governance applicable to listed companies in Singapore."
Singapore will not be the first to have a Stewardship Code, which has its origins in the United Kingdom after the global financial crisis. The Codes in the countries that have adopted them typically target institutional investors, placing on investors the responsibility to ensure that companies are properly run, and to hold the companies accountable when they are not.
"One of the key developments following the financial crisis in the UK was the formal adoption of a code for institutional investors outlining their important role in corporate governance," Mr Cristoph-Hirt said. "They should monitor companies and communicate with them around key business and governance issues, vote their shares, not least to ensure an adequate composition of the board, and - if necessary - intervene when things are heading in the wrong direction."
As the ones holding the purse strings, shareholders have a unique ability to influence the actions of corporate boards and management, said Roger Barker, senior consultant on corporate governance for the UK Institute of Directors.
"Institutional investors have also felt increased pressure from society to pursue a more active approach as champions of governance, and are stepping up their game. This is a positive development - but they need to do more. Shareholders are better placed than regulators to nurture long-term wealth creation in the corporate sector."
But both Mr Cristoph-Hirt and Mr Barker warned that investors wielding their influence for short-term goals at the expense of long-term gains are a dangerous combination.
Mr Cristoph-Hirt said: "Stewardship codes which encourage investors to get involved in the governance of companies are a first step in the right direction. However, they assume that investors are properly incentivised and interested in the long-term success of companies they invest in. Unfortunately this is not always the case. More work on the governance of investors and specifically the relationship between asset owners, such as sovereign wealth and pension funds, and their fund managers is required."
David Gerald, president of Sias, said that retail investors should also improve the quality of their engagement with companies even if they do not have the same level of access as institutional shareholders. Sias has started an initiative to provide questions, based on Singapore-listed companies' annual reports, that investors should ask at annual general meetings.