SIAS's Hyflux rap: A wake-up call for corporate Singapore

EARLIER this week, the Securities Investors Association (Singapore) issued a strongly-worded statement to the board of troubled water treatment firm Hyflux Ltd.

It voiced its concern that Hyflux has not addressed several issues regarding its financial position and that, after about nine months of silence, stakeholders - including creditors owed substantial amounts of money - deserve to know more about what went wrong and what the future might hold for them. Clearly, given that SIAS has been calling on Hyflux to be forthcoming with its plans and finances ever since its problems emerged last May while at the same time urging patience of the company's stakeholders to help save it from liquidation, it is SIAS' patience which now appears to have worn thin.

Included in the SIAS statement were a total of 33 questions for Hyflux's board to answer, among them justification for the generous remuneration package for the chief executive and senior management at a time when the company was suffering financially; the absence of impairments on assets now known to have been performing poorly; the valuation basis for those assets; the level of awareness among the board of the depth of the problems; and whether key personnel will be investing in the restructured entity.

SIAS has asked some very probing questions, the answers to which would be of great interest to many who are concerned about corporate governance issues and those who might think governance standards in the local market have become too lax. The latter would include SIAS' critics who in the past have accused the association of being too soft in confronting companies on behalf of minorities and who have expressed a wish for a tougher stand.

Yet to focus wholly on SIAS' actions - welcome though they may be - would be to ignore the quiet revolution in corporate governance which has been taking place over the past few years.

First came the incorporation of SGX Regco in September 2017, an independent Singapore Exchange regulatory entity with no commercial objectives that has been slowly but surely tightening the rules to ensure a more level playing field and greater protection for minorities. For instance, Regco has issued periodic Trade with Caution notices to raise the flag on unusual share price movements; placed 53 directors and company bosses on a watchlist; ordered special audits; and revamped the rules surrounding exit offers to remove ambiguity by requiring offers to be simply "fair and reasonable". More recently, it announced it is seeking authority to order a second audit if it has reason to believe this is warranted.

Second, the Singapore Code of Corporate Governance was revised last year to enforce adherence to its principles. These deal with, among others, board independence, division of duties between management and the board and remuneration. Although there is still an element of "comply or explain", it is now much harder for companies to simply resort to issuing vague, boilerplate responses when queried about disclosure lapses.

Notice has been served on corporate Singapore. Underwriters, lead managers, auditors, sponsors and banks must raise their disclosure, governance and overall standards of conduct. SIAS' letter to Hyflux further reinforces the message.

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