Electronic Proxy Process for Voting

The following announcement will hopefully make the proxy process more transparent.

Singapore Exchange (SGX) and Broadridge Financial Solutions have signed an agreement to introduce a new service for increased transparency, accuracy and efficiency to the shareholder communications and proxy process in Singapore.


The service is designed to support transition from paper-intensive to an electronic online interaction between listed issuers and their shareholders, both in Singapore and overseas.

The service will use Broadridge's shareholder communications suite of solutions that includes the automated capture of records from the shareholder register, the distribution of personalized communications including proxy forms, and a choice of voting channels, either online via a website or the more traditional printed mail.

The service will enable better reconciliation of voting activity by the corporate issuer and assurances to shareholders 48 hours prior to the meeting date.

The transformation to the new service will benefit issuers that include increased oversight, reduced printing and postage costs, improved authentication of voters, and a secure database to store shareholder preferences for future communications.

Broadridge Investor Communication Solutions, International President Bruce Babcock said that this agreement puts in place a strong foundation from which to further advance corporate governance in Singapore and transform the communications and voting process."

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My Thots....

Yet, to see the details and how it works.
But, glad that SGX has done something about the voting by Proxy process.
Sometimes at AGMs and EGMs, U wonder if the Chair will care to substantiate the Proxy votes "for" or "against" the motion.

Final recommendations of the CGC

This is a letter from Mr Mak Yuen Teen to BT, dated 24/11/2011, on the final recommendations of the Corporate Governance Council (CGC).
He shows  the interlinks of the issues of  "tenure of IDs", "specific limits to number of IDs" and why, not being strict with these issues can further accentuate the  conflict of interests; as was the case with some IDs who provide legal and accounting services.....

THERE is much to commend in the final recommendations of the Corporate Governance Council on proposed revisions to the Code of Corporate Governance. It is pleasing to see that the council has retained most of its initial recommendations, including extending the definition of independence to include independence from substantial shareholders, increasing the proportion of independent directors in certain circumstances, and disclosure of remuneration of each individual director and the CEO.

Reforms of corporate governance are always subject to resistance from vested interests. The greater impact that a proposed reform will have on boards and companies, the greater will be the resistance. However, it is often precisely those strongly resisted reforms that are needed to create a step-change in corporate governance, as opposed to glacial change, and to transform the corporate governance culture in companies. In my view, the failure to adopt strongly resisted reforms explains why systemic failures in corporate governance still occur throughout the world after years of so-called reforms in corporate governance.

It is therefore disappointing to see the council shy away from tougher guidelines which would have led to more transformational change in our corporate governance culture. Regulators have often cited our top ranking in the Asian Corporate Governance Association's Corporate Governance Watch 2010, while ignoring the fact that the same report indicates that corporate governance culture remains our weakest link - scoring only 53 out of 100.

By failing to bite the bullet more strongly on tenure of independent directors, number of directorships, and conflicts of interest relating to business relationships - and giving a stronger push to board renewal - the council may have lost an opportunity to promote a transformation of our corporate governance culture.

The council has decided to water down the recommendation on the nine-year limit on independent directors by removing this from the criteria relating to independence. It has instead recommended that a 'particularly rigorous review' for directors who have served more than nine years and for the board to explain why a director should still be considered independent after nine years. While many jurisdictions, including the UK and Australia, do allow independent directors to have longer tenure if the companies explain, it is rare for companies to exploit the flexibility accorded by the 'comply and explain' approach, especially when it comes to tenure of independent directors. Active institutional shareholder activism and intense media scrutiny help explain why this is so.

Unfortunately, in Singapore, companies do often tend to adopt an overly technical approach to implementing the code, by using the guidelines in the code as the 'ceiling'. In their minds, these guidelines are meant to reflect 'best practices' and there is little reason to do better than these 'best practices'. Indeed, some are using a pseudo-legal approach to independence, by getting a legal opinion to support the nominating committee's determination of independence, when 'independent director' is not a legal concept.

This brings me to the council's reluctance to recommend specific limits on number of directorships. Some have conveniently touted statistics about the small number of directors who currently sit on multiple boards, but have avoided the statistics that these small number of directors are already omnipresent in many companies.

By not putting specific limits, it will again allow boards following a technical approach to point to the fact that any limit is acceptable because no limit is specified in the code.

It is disappointing that the council did not see fit to consult on whether the code should state specific limits on number of directorships in the guidelines when many have expressed the view over the past few years that specific limits are needed. By not consulting on whether the code should include specific limits, but only consulting on a recommendation that boards themselves set the limits and disclose them, it would have been difficult for the council to now recommend specific limits. As the council has noted, some respondents have advocated that the code include specific limits.

Conflicts of interest
Finally, on the guidelines on independence pertaining to business relationships, the council could also have done more. While it is true that business relationships with other related corporations may not necessarily affect independence of a director especially if these related corporations have few dealings with each other, they could nevertheless pose conflicts of interest for independent directors in some cases.

However, my biggest concern in terms of business relationships is with independent directors who work for firms providing services to companies, such as legal and accounting services.

We have even seen instances of companies with independent directors chairing audit committees while their firm provided accounting-related services. In my view, the council should have come down stronger on these kinds of business relationships.

It should also have lowered the $200,000 annual threshold for business relationships, and included the recurring or non-recurring nature of such relationships in the guidelines. For example, a director whose firm is retained on a long-term basis as its legal adviser should not be considered independent even if the annual amount of fees fall well below $200,000.

The matter of monitoring and enforcing the 'comply or explain' approach is not addressed by the council. However, this is probably more a matter for the Monetary Authority of Singapore (MAS) to consider.  

I hope that the MAS will impose a greater responsibility on the Singapore Exchange to monitor and enforce the 'comply or explain' requirement in the listing rules. While it is well and good to raise the bar on the responsibilities of institutional investors, the exchange must also play its role.

Overall, my biggest worry is that while the revised code may help us maintain our high corporate governance ranking and even improve it, our corporate governance culture, implementation and enforcement will remain weak. I fear that complacency and self-delusion will in the longer term come back to haunt us.

The writer is an associate professor of NUS Business School

BT
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My Thots.....

 I have often used the word SGX ecosystem in my posts--- not for want of a fancy word.
If U look deeply into the nature of things, unless U invest entirely out of  SGX listed cos. U are affected by the SGX ecosystem.

An "ecosystem" implies that the "organisms" in the ecosystem are interlinked and inter-dependent. Minority shareholders, retail shareholders, IIs (Institutional Investors), Majority shareholder, SGX (itself i.e regulatory and non-regulatory components), MAS, Fundmanagers, Research Analysts, Brokerages and even the biz media are all interlinked and inter-dependent.

Take away all the plankton, the anchovies and the sharks and whales will die off.

But, if each and everyone of the "organisms" in the ecosystem are acutely aware of their inter-dependence, then they will seek to understand how the ecosystem works and to preserve the "balance".


If U are an "organism" in the ecosystem, self preservation means U will want to do what it takes, so as NOT to endanger and destroy the ecosystem. Not just for minority shareholders, but also for the majority shareholders and MAS/SGX too!!

The important question is:
Has the Corporate Governance scene in SG reached the stage of maturity in terms of "awareness"  as in say UK, US & Australia, to allow the companies to come up with their own limits.
There shareholder activism is strong with good media scrutiny and support.
Here, we are at the precipice saddled with many rampant recent Corporate Governance abuses.
Faced with no choice , we are at the incipient stages of  "being aware"  of the importance of Corporate Governance and getting all in the ecosystem involved; so as to help overcome the resistance to current "bad practises".

ID Tenure Limit

I am quite disappointed that the corporate governance code prescription for ID tenure limit  of 9yrs max,  was abandoned.........

See following excerpt from BT article by Lynette Khoo and Kenneth Lim on 23/11/11
Excerpts....

Most key changes proposed to the corporate governance code remained intact - but one was watered down considerably in the final recommendations to the Monetary Authority of Singapore (MAS).

This involved a proposed nine-year tenure limit for independent directors. The Corporate Governance Council has decided, instead, to leave it to the nominating committee to decide whether a director is still independent after nine years of serving on the board. This followed feedback from the industry that a high number of directors will be defined as non-independent if this code is applied.
The Council said it had sought to avoid being too prescriptive in its recommendations. 'We have to let water find its own level,' said Council chairman Alan Chan, who is also chief executive of Singapore Press Holdings.
The Council recommended that the independence of such directors be subject to 'particularly rigorous review', and the board should explain why the director should be considered independent.
A stricter test of independence, which includes recent associations with substantial shareholders, was kept in place.
The Council also maintained the initial proposal that independent directors make up at least half of the board in certain circumstances. The recommendations were finalised after gathering feedback from 75 respondents between June and July.
The Council yesterday shed light on how each decision was calibrated, weighing the varied views among the respondents.
Mr Chan stressed the need to have a balanced Code that is 'workable in practice'.
To facilitate compliance with the revised Code, the Council recommended that a transitional period be introduced such that the Code will only apply to annual reports for fiscal years commencing from July 2012.
Leo Mun Wai, MAS assistant managing director for capital markets, said MAS will evaluate the Council's recommendations and release its response in due course.
Some industry players were disappointed that the term limit for independent directors missed the cut.
HIM Governance CEO Tan Lye Huat felt that the provision should have been kept and the 'onus should be left to the nominating committee or board to comply or explain' as he believes there is no shortage of directors in Singapore.
Stefanie Yuen Thio, joint managing director of TSMP, said there should be compelling reasons for a director to remain on the board after serving for nine years or he should step down for at least two years.
'The 'explain or comply' policy has not been particularly successful in promoting corporate governance' and companies may adopt boilerplate disclosures, she added.
While the Council acknowledged the risks of long tenures on independence, it said boards needed to have discretion in this regard.
OCBC chief executive David Conner, who chairs the subcommittee on board matters in the Council, said he did not expect any companies to 'take the Code lightly'.
The Council also kept unchanged its initial recommendations to let boards decide the maximum number of directorships for appointees; to fully disclose directors' remunerations; and to decide resolutions by polling.
Loh Hoon Sun, managing director of Phillip Securities, was one of the parties who provided feedback on the initial proposals. He suggested that the appointments of some independent directors should be left to professional bodies, rather than the companies themselves. 'Personally I'm a little disappointed that my suggestion was not adopted,' he said.
But Mr Loh felt that the revised Code in general was an improvement over the 2005 version.
Others note that more could be done to address the business relationships that independent directors have with the companies where they serve.
One matter of debate was what constituted material services that would compromise independence of directors. The proposed definition keeps the annual $200,000 threshold over the past year, and extends it to non-profit organisations linked to the director.
Yap Wai Ming, partner at Stamford Law, felt that the threshold of $200,000 for 'material services' could be lowered.

BT

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My Thots...

Are the IDs indispensable?
There are cases of IDs who are way past retirement age who nods off and go to sleep during AGMs, some of them are in their  late 70s or 80s, close to their 90s in age.
I have nothing against age, as some like Richard Hu are old but their wisdom, experience, depth of knowledge and alertness of mind are important resources that could be tapped.
But, for some after 9 yrs, they are bored and they cannot hide their boredom; openly sleeping during AGMs----- those who attend AGMs regularly will attest.
A rotation may help; if they are so "invaluable", as claimed; else, such bored and indifferent IDs, should simply go.

Well, nobody is indispensable. 
Most or  Is it  all IDs cannot live forever......

Reits- Corporate Governance

The following is a very timely article by BT's Wong Wei Kwong, dated 15/11/2011 entitled   "Don't let Reits be the next wave of governance lapses ."

Excerpted....... SINGAPORE boasts of a thriving real estate investment trust or Reit sector, but recent events have served another reminder that beneath the glowing surface, there are some key fundamental concerns. K-Reit Asia, last week, pushed through its plan to buy 87.5 per cent of Ocean Financial Centre (OFC), and raise some $976 million through a rights issue to fund part of the cost. It had earlier announced that it would pay some $1.57 billion to buy parent company Keppel Land's entire stake in the OFC office building. Keppel Land will see a net gain of about $492.7 million from the sale.  Put before shareholders for their approval at an extraordinary general meeting (EGM), the proposal ran into howls of protest. Shareholders questioned the stiff price and timing of the deal, at a time when the economy is facing a slowdown. Shareholders noted that while the prime Grade A office building in Raffles Place has a tenure of 999 years with 850 years remaining on the lease, KepLand is selling its stake with only a 99-year lease. Others questioned why K-Reit is paying its manager (which is owned by KepLand) an acquisition fee - even though it is buying the asset from its parent company.There were also rumblings about the independence of the manager. In a nutshell, the EGM brought to the fore two key issues relating to Reits here that corporate governance advocates have been highlighting for some time: This isn't the first time - and probably it won't be the last - that issues like these arise at a Reit. For some time now, there has been growing disquiet among corporate watchers about weaknesses in the corporate governance structures in Singapore Reits. Earlier this year, a review of Asia-Pacific Reit markets by the CFA Institute produced less-than-assuring results. Looking at the governance of Reits in Singapore, Australia, Hong Kong and Japan, the institute in its report called strongly for Reit managers to be independent. In the current most common scenario, the Reit sponsor wholly owns the Reit manager, and also holds a large stake in the Reit. And even before the latest K-Reit development, cases of sponsors selling properties to Reits have triggered concerns about conflict of interest, and unitholders have often questioned the purchase of these assets and how they were priced. The CFA Institute said that to better protect ordinary unitholders, most directors on the boards of Reit managers should be independent of management, sponsors and substantial unitholders.  This should be made law, rather than just a best-practice guide. There is also the need to have more transparent structures to pay Reit managers and to tie these more closely to performance, and indeed to require all Reits to hold annual meetings for unitholders. Reits are often presented as defensive plays, and given their yield structures, there is some truth in this. But it would be unfortunate if investors buy into Reits for their relative safety just to have their interests as minorities undermined by weak corporate governance structures. If nothing is done, the Reit sector could be where the next wave of governance lapses emerge, and that would be a pity for a sector that has done quite well so far.

BT

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My Thots......

A stitch in time saves  nine!!

Corporate Governance
Corporate Governance is an evolving process which needs the participation of all------- manager of the Reit, the Board of the Reit, majority shareholders (aka Sponsors), retail/minority Reit investors, not  forgetting SGX and MAS; which encouraged and fostered the ecosystem for the growth of this important asset class.
In the Sg context, Reits can and must evolve into a class of shares in which conservative investors can look forward to regular recurrent dividends payouts (DPUs, DCFs) with relatively low risks and be de-risked from untimely "wants" for cash calls.
 Note: I call it a "want" and not a "need", as it is often the sponsor/majority shareholder whom is the chief beneficiary and decides on the timing for the call. A well concieved Reit with good Reit-able tenants have the luxury of choosing the timing for acquisitions; it is the sponsor who needs to cash out at opportune situations.


Why Reits ?
The raison det're for Reits for the Sponsor/majority shareholders is that it allows monetisation of their assets and serve as a vehicle for recyling the monies; in short, as the last and most important component of the asset recycling model.
The raison det're for Reits for the minority/retail shareholders is that it serves as a defensive investment choice for regular DPUs, given that the Reits tenants are supposedly chosen to give safe recurrent incomes with locked in leases.
For the Asset recycling model to work, the Sponsors must not forget the investors at the end of the food-chain.
Hence, the Reit must acquire properties with good location, which have a stabilised portfolio of proven tenants (in terms of ability to pay),  with a stabilised mix of tenants able to provide that mix of regular recurrent income net of operating expenses and interest charges which can then translate into accretive DPUs.
That said, it implies a period of incubation at the sponsor level, so that the rental profiles in terms of tenant mix, WALE, cost of borrowing  and operating expenses are all quite stablilised.
As  OFC is only 80%  rented out at passing rentals of SGD 9psf with the remaining 20% subject to the uncertainty of the current Office rental mkts (buffeted by the woes of the Eurozone crisis), rental support is an artificiality ------- it is  certainly not real as the tenants are not captured yet and  is an attempt to  substitute  for (get around)  the uncertainties with an explicit guarantee by the majority shareholders (aka Sponsors). One may ask, what if the returns that sponsor was seeking did not materialise, so that the sponsor herself falters and fails,  and will be unable to cough out the guaranteed rental supports ?
Regulators may want to look at the validity and the use of such "Rental supports". How do they know that the sponsor will remain viable to  keep their promissory "Rental supports"?  What if the weaker sponsored Reits, also want a piece of this kind of  "Rental supports" options/actions? 
The issue is that the Sponsors themselves may have hidden agenda and entirely different motivations for unloading the property assets at such a time, completely unaligned to the Reit  biz model.

Kepland, as the prime beneficiary could be trying to lock in the price of OFC before the downturn and eyeing the cash from the monetisation of  OFC for certain "prizes" that they want to capture in a mkt downturn---- in other words, Kepland is trading and timing the buy and sell of property assets which IMHO, is fair as it is in the biz of developing and trading of such properties.

But, for the KReit management and KReit Board,  which is in the biz of finding  a good tenant mix and locking in good rents and rental periods so as to get positive recurrent incomes with positive reversionary outcomes, buying or selling property assets should not be happening in such uncertain periods.

Yes, KReit can cite need for growth, but growth must be from acquisitions of properties that are accretive DPU-wise and whose incomes have truly stabilised.
In this case, KReit is getting itself involved in trading of property assets risks ; as well as risks in the volatilities associated with rentals rates, borrowing costs, as well as risks of a possible rise in gearing (falling property values or NAVs may risk downgrades in debt ratings due to increased gearing;  causing a rise in borrowing costs).

Growth should be according to the schedule guided, well in advance-----OFC was not due to be offloaded by Kepland until end 2012 or early 2013------ so that investors do not get nasty surprises for cash calls; cash which they can use for buying juicy assets at low low prices in these crisis driven environment.

For KReit minority shareholders (as distint from the sponsors who have a  stake in OFC, the choice is between an meagre accretive 2% increase in Proforma DPU vs having to cough out 17/20 of cash for the rights issue.
3 cash calls in 3-4 yrs is an awful record for KReit, and the pliant Board is not taking good care of minority shareholder interests. The worry is in MBFC Tower 3. Will there be another cash call?


Does that mean that minority shareholders should just sell their shares and park the money in others?
To answer this Q, we come full circle, back to the issue of evolving Corporate Governance---- reporters, shareholders, corporate governance watchdogs------ by speaking up , helps to influence and shape opinions and policies in the Reit investment ecosystem.
The number of available safe haven defensive plays in the Sg mkt are few and far between.
Reits can be and should be such an asset class.

Minority Shareholders must speak up, so that the Sponsors (whether TAL for Ascott Reit or Kepland for KReit etc)  realise that such practises are contrary to the practise of good corporate governance; and in doing so,  help effect a change.

Make the Reits you own rise to better standards of Corporate Governance.
I used to subscribe to the thinking of sell and buy another asset/share, if you disagree with management.
But lately, I have another view------Don't just take the easy route of selling, which will in the end limit the number of types of shares of the different assets classes available for investments on the SGX----Speak up and stand up for better Corporate Governance.

Inherently, Kreit and most of the Temasek linked Reits vehicles have very good sponsors (Keppel Corp, FNN, Capitaland etc) and a robust biz model. But, as with every situation when the majority shareholders have complete dominance, minority rights can get overlooked and if undefended, trampled.
Complacency creeps in and the laxity can fester into a downward loop.

This BT article has done good by creating awareness of the Corporate Governance issues and make the regulating bodies be mindful of the possibilities of  the next wave of potential problems.

Bigger Issue
Hence, the issue here, is not really the quality of Kreit, as one may argue that Kepcorp and even Temasek will come in to help even if Kepland should inexplicably fail (which is unthinkable to many given Kepland's pristine record).
The issue is about fostering an environment, an ecosystem,  that is conducive to the evolving Reit class in Sg.
Yes, in terms of size, with 23 listed Reits and mkt cap of SGD 34b, SgX listed Reits has got the heft, but Corporate Governance is a process, more correctly an evolving process and as minority shareholders, we must support, speak up and stand up --- for it is only when we do so,  that the media, NGO watchdogs and regulatory bodies will sit up, listen and act!!