Sias to raise quality of AGMs through new initiative

Mr David Gerald.
Mr David Gerald. ST FILE PHOTO

Corporate members asked to fund plan to research annual reports, among other tasks

The Securities Investors Association of Singapore (Sias) is appealing to its corporate members to donate $3,000 each annually towards an initiative to raise the standards of annual general meetings (AGMs). The exercise is expected to cost about $1 million a year for five years.

Sias president David Gerald said it will kick-start this initiative in July with part funding from the Singapore Exchange (SGX), which will cover at least six months till the end of the year. It declined to disclose the amount.

Sias has about 720 corporate members, so the exercise could raise about $2.1 million a year.

The exercise entails engaging a team of analysts to research the listed companies' annual reports and come up with relevant questions that should be raised during their respective AGMs.

In the first year, Sias will start with analysing 200 companies selected from the pool of firms which hold their meetings in the second half of this year. By next year, it aims to cover a further 350 firms, 500 in the third year and 600 in the following year. By 2020, the association would have covered all listed companies in Singapore.

BETTER UNDERSTANDING

Shareholders should be helped to concentrate on the main business of the meeting through the analysis of the annual report and seek accountability in the right areas. The market will become more sophisticated and attract more investments if retail investors are becoming more discerning.

MR DAVID GERALD, Sias president

Besides analysing annual reports, the team will conduct research and surveys on corporate governance and investor rights issues.

To help in prioritising which companies should be analysed first, Sias will take the bottom 20 per cent of firms based on last year's scores from Gems (Governance Evaluation for Mid and Small Caps) and the SMU Corporate Governance index.

The analysts will pose questions that will focus on the three broad categories of strategy, financial statements and corporate governance practices.

Mr Gerald said: "Shareholders should be helped to concentrate on the main business of the meeting through the analysis of the annual report and seek accountability in the right areas. The market will become more sophisticated and attract more investments if retail investors are becoming more discerning."

He said that many are already getting there but thousands need to know how to ask questions and know what is happening in the companies. This initiative will help encourage shareholders to engage and interact with the board in the right direction.

As many listed SMEs are not covered by analysts who usually raise interesting issues, this initiative will enable shareholders to get an independent source of information on these firms, added Mr Gerald.

There is typically a two-week window from the time the annual report is ready and the AGM itself. Sias plans to analyse the annual report once it is made available, and send the questions to the listed firm before its meeting. The firm is encouraged to put its answers on SGX Net on or after the day of the AGM.

Mr Gerald noted that there has been "great improvement" over the years in the quality of AGMs relating to the accountability and ability of shareholders to ask questions.

However, he noted that the focus seemed limited to certain topics like remuneration and dividends, both areas which can lead to shareholders enhancing their understanding if there is greater transparency in the information provided.

For example, shareholders can ask how remuneration is arrived at for senior management. And why a company does not pay dividends despite being profitable.

Sias is a charity with Institution of Public Character status, which means there is a 2.5 times tax deduction for every dollar donated. It has long tried to raise the bar among investors by running education programmes that explain annual reports and stock investment fundamentals.


What it should have been (published on May 11, 2016)

In our story headlined "Sias to raise quality of AGMs through new initiative" yesterday, we said that Sias is appealing to its 720 corporate members to donate $3,000 each annually towards an initiative to raise the standards of AGMs. Sias has clarified that it is appealing to all firms listed on the Singapore Exchange to support the initiative. Sias does not have corporate members.

A version of this article appeared in the print edition of The Straits Times on May 10, 2016, with the headline 'Sias to raise quality of AGMs through new initiative'. Print Edition | Subscribe