TRANSFORMADORES DE POTENCIAL
DISPOSITIVOS DE POTENCIAL CAPACITIVOS.
A key highlight of the findings to the question of what corporate governance is to smaller listed companies (SLCs) was best reflected in the words of two individual interview respondents. One respondent mentioned that it would depend on who one talks to (IIR 14), and the other concurred that it would depend on who you ask (IIR 21). Whilst this beginning research question elicited findings that were reduced to five themes, there was however a general consensus that did emerge. A companion question pertaining to the motivating factors that cause SLCs to adopt good corporate governance practices and embrace the Code’s ‘comply or disclose’ philosophy produced four themes.
The two lead questions to probe the difficulties and other issues that SLCs face in corporate governance and Code compliance led to a combined total of 15 themes that were not unexpected. Unsurprisingly, most respondents had little to no comments on the first two lead questions on how the Code had impacted corporate governance in SLCs compared to pre- Code days and in the mid-term period. These two lead questions generated five themes combined, while the last lead question on the impact 10 years on prompted findings that were reduced to five themes alone. Finally and expectedly, the four lead questions in the last category to explore improvements and changes needed among four principal corporate governance stakeholders spawned the most themes for regulators followed by the SLCs.
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150 SLCs primarily viewed corporate governance in general and Code compliance in particular as both an obligation to comply and a compliance burden. There was a widespread view that SLCs would not care about corporate governance if it was not required and as one executive director shared, they would be happy just to be left alone. In this regard, the finding that SLCs would just do the bare minimum or find ways around it rather than embrace the spirit of the Code was corroborated with secondary data. The lament of a compliance burden is real, especially for a company that is still largely family-owned after a public listing and is owner- managed. A drastic change from being self-accountable to being told of accountability to shareholders and other stakeholders had been difficult for owner-managers especially where they retained a majority shareholding.
Four motivating factors had been suggested to be behind what pushes some smaller listed companies to embrace corporate governance practices and the Code’s requirement to comply or explain more readily. The most frequent suggested theme was the attitude, awareness, and leadership among executive management, and the preceding analysis showed that attitude comes from being ethical and honest about accepting responsibility for corporate governance. Ethical owner-managers acting in the best interest of the company fit the description of Theory Y behaviour, as opposed to Theory X behaviour which describes managers who pursue their own interests. Antithetical to agency theory, stewardship theory informs the scenario of an ethically responsible owner-manager growing the company in the interests of all stakeholders.
Cost and resource constraints were the most mentioned under the lead discussion question of problems and difficulties faced in corporate governance and Code compliance. Besides the issues raised summarised under the two themes of ‘costs’ and ‘resources’, observations with the theme of ‘independent directors’ (IDs) brought up problems and difficulties IDs faced in SLCs. Increasing Code compliance requirements led to the general perception that IDs had been turned into watchdogs for the regulators, what one ID described as resulting naturally in a “they versus us” situation. The six challenging Code principles and guidelines cited by the respondents, in descending order of the frequency of citations, were: risk management; internal audit; CEO-duality; director tenure; remuneration disclosures; and lead independent director.
Interestingly, the president of a business organisation observed that in the pre-Code days, corporate governance was left to good habits. Separately, the president of a professional organisation observed that there had not been much awareness with corporate governance and
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151 the Code in the interim period. A divergent view was found among certain directors in relation to the impact of the Code on corporate governance practices of the smaller listed companies more than 10 years on. On one side, some argued that the Code had unequivocally created more awareness to the concept of corporate governance, described as ‘extremely aware’ to ‘awareness is stronger’ now than before. The counter argument is that there had not been any change to corporate governance awareness, and one person described it as being tolerated and it would not be missed if taken away.
Two recurring messages for the regulators revolved around the philosophy of comply or explain adopted in the Code, and the need for striking a balance in regulatory governance. Some directors felt that the soft approach of the Code lacked ‘bite’ and which had therefore, rendered it ineffective to spur compliance. One independent director called for the Code to be made mandatory while cautioning against going overboard, and to allow time for the spirit of the Code to sink in. On the matter of balancing the cost-benefit of regulations, many felt the last round of changes to the Code and Singapore Exchange Listing Manual rules were too onerous. Business and professional organisations with an interest in corporate governance are generally viewed to have contributed to creating corporate governance awareness, although one saw them as self-directed rather than helping smaller listed companies.
Change in the companies is expected to be slow in coming to the family-owned and owner- managed smaller listed companies, especially where the older generation is still active. While they need corporate governance training the most, they are also the least likely to attend any training courses, if at all. Lastly, the prevailing perspective on shareholders of the smaller listed companies is that they have yet to make an impact in influencing corporate governance in these companies. More specifically, they need to be more robust in requesting disclosures of additional information, and raise appropriate queries at AGMs.