For years, it has been Asia's face of corporate governance. Now for the first time, Singapore has relinquished that honour to Hong Kong (picture), according to a survey ranking.
Published by the Hong Kong-based Asian Corporate Governance Association (ACGA) and research firm CLSA, the ranking of 11 regional markets scored the Republic two points short of its closest rival.Singapore powered ahead in terms of its auditing standards as well as rules and practices for companies, such as stipulating faster reporting deadlines and more frequent reporting, said ACGA's secretary general Jamie Allen.
But it fell behind on governance culture, shareholders' rights, media freedom and the transparency of its enforcement activities, among other things.
Said Mr Allen, in the 168-page report: "Singapore gives the impression that its reform process has reached an acceptable plateau — to be fair, many of its disclosure standards are higher than those of Hong Kong — while its officials seem less concerned that some key local rules and practices are not in line with global best practices."
While acknowledging the Republic's ongoing process of reform, such as to securities laws, Mr Allen added, "there is a palpable sense that the pace of policy-making has slowed".
Despite a late start, Hong Kong has gained momentum in its corporate governance reform, noted Professor Mak Yuen Teen, the regional research director of consultancy Watson Wyatt.
"We came out with the code of corporate governance in 2001 while Hong Kong came out with it in 2005. But when they did, they incorporated many of the recent international best practices," said Prof Mak.
According to the report, examples of Singapore's relative weaknesses include listing rules that are weaker than Hong Kong's, when it comes to shareholder's rights. Discounted stock options, which could potentially hurt shareholder's interests, are still permitted.
Disclosure of individual-director remuneration is limited, and independent directors in listed companies need not be independent of the controlling shareholder, noted the report.
Mr David Gerald, the president of the Securities Investors Association of Singapore (SIAS), told Today that Singapore's move towards a complete "caveat emptor" or "buyer beware" market may have contributed to its lower ranking.
"That means investors have to know the product, they will not be protected by the exchange or regulators with laws … whereas Hong Kong is a bit more regulated," he said.
While both observers do not think the slip in rankings will hurt Singapore's reputation as a financial centre — with Mr Gerald cautioning against a "knee-jerk reaction" — they agreed the Government should strengthen regulations on shareholder's rights, to keep investor funds here.
The Monetary Authority of Singapore (MAS) said it would continue with periodic reviews of the Code of Corporate Governance with the Singapore Exchange (SGX) and market participants, to ensure local legislation and best practice codes are relevant.
The MAS and SGX are also implementing some of the recommendations made by Prof Mak in his study on corporate governance practices here.
"For example, SGX has launched a new announcement template on SGXNET for notice of resignation of directors and key officers. And MAS is working with the Singapore Institute of Directors to enhance current efforts in director training and professional development in Singapore," said an MAS spokesperson. Corporate governance reform: HK edges out S'pore
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