Business

Tuesday October 20, 2009

Better voting process necessary in shareholders’ meetings


KUALA LUMPUR: Improving the voting process at shareholders’ meetings will help lift corporate governance standards in the country and boost local stocks’ appeal to foreign investors, experts say.

Asian Corporate Governance Association (ACGA) secretary-general Jamie Allen said the proxy voting issue was the most simple to solve and this should be done sooner rather than later.

He said the voting process at AGMs and EGMs should be conducted via “full voting” that included all shareholders rather than the current “show-of-hand” practice.

Jamie Allen says local stock regulators are doing a good job promoting corporate governance

“It is not true that the full voting process is more expensive to conduct. Experience elsewhere shows that the system can be done efficiently and at minimal cost,’’ Allen said at a talk organised by Bursa Malaysia yesterday.

Other key issues related to the voting process can also be enhanced.

Allen said among the main grouses from foreign funds about investing in Malaysia were the lack of ample time given to respond to companies’ notices calling for votes on resolutions at shareholders’ meetings.

To remedy this, he suggested that the grace period should be extended from the current 14 days to at least 21 days. “The global standard is 28 days,’’ he said.

Credit-Suisse Securities (M) Sdn Bhd head Stephen Hagger said the local corporate governance scene had improved significantly over the years, but issues such as related party transactions remained a major concern.

“Unfortunately, the bull market is bad for corporate governance as all is forgotten in a rising market,’’ he said.

Investors, however, were more willing to pay a premium for companies with good corporate governance structure, he said, adding: “Apart from the voting process, the corporate governance structure is in place.’’

Bursa Malaysia is trying to boost foreign participation in the market, which had recently dropped to its lowest level in recent years, by getting local listed firms to comply with global best practices.

Allen noted that while high corporate governance standards would be a strong pull for foreign investors, estimates showed that about only a third of these institutional investors today put corporate governance as a key focus in the investment decision-making process.

“About two-thirds of foreign institutional investors are short-term investors, and are not likely to pay much attention to corporate governance issues,’ he said.

Allen noted that local stock regulators were doing “a good job” promoting high corporate governance standard in the country. “It is difficult for regulators to inculcate good corporate governance, it is up to companies and shareholders to put flesh on the bones.’’

ACGA is an independent, non-profit advocacy group. It works with investors, companies and regulators to promote effective corporate governance practices throughout Asia.

The association’s membership comprises more than 80 global investment and regional pension funds, financial institutions, listed and private companies, law and accounting firms, as well as educational institutions in Asia.

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