Improving corporate governance – a collective responsibility

Mrs Lim Hwee Hua, Chairman of SIAS

Mr David Gerald, President and CEO of SIAS

Ladies and gentlemen

Good evening

1. I’m happy to join you this evening at the SIAS 15th Investors’ Choice Awards.
   

2. For 15 years, SIAS has been championing the interests of retail investors in Singapore. It all started that fateful day in 1999, when the shares of 172,000 Singaporeans were expropriated by the Malaysian authorities. Mr David Gerald founded SIAS and led the effort to free the frozen shares. I remember what happened vividly because I had just started work then - I was a civil servant in MTI - and I had colleagues in MTI who were affected. Some of them had their life savings invested in these shares, and they were very worried about the outcome. And it was because of the effective intervention and negotiation by SIAS that eventually led to the release of the shares. Investors in Singapore, including my former colleagues, were greatly relieved, and SIAS became a household name.

3. Since then, SIAS has gone on to successfully resolve many other cases affecting investors, like the China Aviation Oil saga, NatSteel, more recently, Olam. Today, SIAS is 71,000-strong, including a Youth Chapter with 2,500 members. It has also expanded its work beyond promoting investors' interest, to promoting corporate governance and spearheading initiatives to educate the public on financial matters. So I want to take this opportunity tonight to commend the people at SIAS, especially Mr David Gerald, for the good work done over the years. Thank you very much, and well done!
   

Investor education – the cornerstone for advancing Singaporeans’ financial well-being

4. On this 15th anniversary of SIAS, it is timely to look ahead to ensure that SIAS stays relevant. David has set out some plans going forward, and I want to talk briefly about one of key areas he highlighted. One of them is investor education, or as David mentioned just now, smart investing. And I think it’s an important effort that needs to be done in Singapore, because the basic principles of investing are still not well understood.

5. Far too often, we see retail investors in search of the elusive Holy Grail – hoping to beat the market by actively trading or selecting the right stock. But as a matter of arithmetic, the average investor cannot beat the market. In fact, study after study has shown that very few active fund managers outperform their benchmark over any meaningful period of time. Those who do are invariably difficult to predict in advance, and they often do not beat the average consistently.

6. Some point to Mr Warren Buffet as an example of how it is possible to consistently outperform. But for every Warren Buffet, there are many one-hit wonders in the investment world. Even the Great Sage of Omaha does not get it right all the time. And he has laid out recently in his will that he wants his trustees to put his money, not in his own shares, but into a low-cost index fund. Because he believes, and I quote, “the trust’s long-term results from this policy will be superior to those attained by most investors…who employ high-fee managers”.

7. It’s easy to get swayed by promises of quick returns on investment, especially in today’s low-yield environment. But in the financial markets, there is no such thing as a free lunch. If anyone is promised higher returns, it will almost always mean that he is exposed to higher risks. As the old saying goes, if it sounds too good to be true, then it probably isn’t true. This is why it is incumbent on financial institutions and advisors to make the downside risks perfectly clear and simple to the retail investor when selling any investment product.

8. At the same time, much more needs to be done in terms of basic investor education. We should help Singaporeans to think of their investments from a diversified portfolio perspective, and consider how products like government securities or passively-managed index funds can be useful components of their portfolio, especially when doing their financial or retirement planning over a longer-term horizon.

9. In this regard, SIAS is well positioned to provide financial education to people on the management of their wealth and retirement savings, SIAS has many well-established investor education programmes, and you are trusted by the public for your investment expertise.

10. I’m glad to hear that you’ve started working with the People’s Association to organise programmes for both senior citizens and young working adults, and that you’ve also started to reach out to the student clubs of tertiary institutions. These are good beginnings, and much more can be done. I hope SIAS will continue to strengthen your outreach, and play a bigger role in financial education, and help build a community of educated and informed investors. 
    

Corporate governance – for the protection of market and investors

11. Another key area of focus for SIAS is corporate governance. We all know that it’s critical. Strong corporate governance standards and practices are one of the fundamentals upon which Singapore's reputation as a trusted and competitive international financial centre is built.

12. While SIAS has been doing its part, there are many other stakeholders in the corporate governance ecosystem, including regulators, shareholders, auditors, analysts, professional bodies, as well as the media.

13. All members of the ecosystem need to take ownership of their roles and work together to protect the interests of our fellow Singaporeans. For example, SIAS works closely with regulators to advise Singaporeans on new rules and regulations which may affect their investment decisions.

14. Businesses in particular have an important role to play. If they are run well, they can bring benefits to not only shareholders, but also their employees, families and the communities they serve. Businesses must therefore see good corporate governance as an integral part of their operating culture.

15. In this respect, we have a good record of corporate governance among our home-grown firms. Companies like SingTel and ST Engineering have won awards in their respective corporate governance and transparency categories for three years running. For example, ST Engineering was one of the first local companies to hold quarterly results briefings. It was also among the first to switch to voting by poll at their AGMs. SingTel gives their institutional investors special access to the Board, even though this is not a common market practice. At the meetings, SingTel’s Chairman and board members share the board's perspectives on a broad range of topics, such as market developments, key business issues and management succession plans.

16. These are just a few examples of how Singapore companies have put in place good corporate governance practices to give more value to shareholders. Later we will be recognising several other companies that have demonstrated exemplary corporate governance and transparency practices throughout the year. I encourage all of you here to learn from one another, and continue thinking of new ways to enhance your corporate governance and transparency practices.

17. Tonight, we will also be recognising our financial journalists and retail brokers for their contributions to the investing community. As intermediaries, brokers can provide retail investors with a better understanding of their investments. And from the media side, clear reporting and accurate financial information from our journalists will help investors to be more informed, and facilitate their decision making.
    

Conclusion

18. So all this is part of our ecosystem for corporate governance; ultimately, improving corporate governance has to be a collective responsibility. So I thank all of you for your commitment and efforts in raising the high standards of corporate governance in Singapore, and I extend my congratulations once again to all the award winners tonight. You have shown great leadership in upholding high corporate governance standards, and I hope you will encourage and inspire many more to follow in your footsteps.

19. Finally, I would like to say that the success of a ground-up organisation like SIAS bodes very well for Singapore’s future. Because what SIAS demonstrates is the spirit of active citizenship.  If more Singaporeans can commit to helping one another, our collective efforts will result in a better society and a home we can all be proud of. So on this note, I wish SIAS every success as it continues its good work in supporting Singapore’s retail investors, and I wish everyone a very pleasant evening ahead. Thank you very much.