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Copyright 2005 Singapore Press Holdings Limited
The Business Times Singapore

August 4, 2005 Thursday

SECTION: SINGAPORE COMPANIES

LENGTH: 568 words

HEADLINE: NUS survey finds confidence shaken in corporate governance here

BYLINE: Joyce Koh

BODY:
THERE is lower confidence among listed companies that minority investors' interests are adequately protected or that market malpractices are not a significant problem in Singapore.

A study conducted during the rash of corporate scandals this year also showed that the majority of respondents felt most companies here could be doing more to beef up corporate governance. But ironically, almost 40 per cent of them said they do not have a system of identifying and managing risks.

The survey - Corporate Governance and Directors' and Officers' Liability Survey of Listed Companies in Singapore (2005) - was conducted by a unit of the National University of Singapore (NUS) Business School and commissioned by Jardine Lloyd Thompson (JLT).

The study was carried out from March to May this year and had 78 valid responses from senior executives of listed companies.

Certainly, the past year has witnessed many corporate governance woes. Shareholders of high-flying stocks like China Aviation Oil, Citiraya and Accord Customer Care Solutions were left ruing their investments amid police probes of misleading financial information.

'The increased concerns are expected given the recent corporate scandals,' said Mak Yuen Teen, co-director of NUS' Corporate Governance and Financial Reporting Centre.

He added: 'Singapore has a well-deserved, hard-earned reputation as a country where the rule of law, ethics and integrity are taken very seriously. This reputation, once lost, is hard to regain as some countries have discovered to their cost.'

Tony Mitchell, managing director for financial solutions for JLT Asia, said: 'It is, however, important not to over-react to the survey results, as Singapore continues to top corporate governance polls and surveys in Asia.'

Encouragingly, almost 70 per cent of respondents from the survey said they have reviewed their risk management functions as a result of these recent trading and fraud losses.

A majority, however, felt that regulators here had a part to play in improving corporate governance by giving incentives such as listing fee or audit fee discounts to companies which score high in good governance.

Reflecting current concerns, the top two reasons where claims may arise against directors and officers are fraud and inaccurate and misleading disclosure of financial information.

What is more, respondents expect claims against its directors and officers to be a rising problem in the future.

Mr Mitchell pointed out that after the right checks and balances have been put in place in the firm, the next step is to 'institute a comprehensive D&O (directors and officers) insurance programme to cover against the residual risk of liability claims against directors'.

More than 80 per cent of respondents saw D&O liability insurance as essential to a listed company's insurance programme, and about 75 per cent of them felt this sort of insurance would help attract and retain experienced directors.

In a separate survey by JLT, about 80 per cent of insurers assessed that the level of D&O risk in Singapore has risen over the last 12-18 months. This has led to insurers cutting the scope of policy coverage.

In the NUS study, about a third of respondents said the company was the major source of potential claims, while there was an increase in respondents who felt claims from minority shareholders were of high or very high concern.

LOAD-DATE: August 3, 2005