Mr President -- David Gerald, Members of the SIAS, and Friends,
It gives me great pleasure to attend this sixth annual dinner of SIAS, which features the annual presentation of awards to companies that, I believe, have met the Association's lofty standards of governance, disclosure, and transparency. Thank you for inviting me.
Genesis of SIAS
2 SIAS earned its spurs in the wake of the collapse of the CLOB market in Malaysian stocks traded on the Stock Exchange of Singapore. That collapse came in the aftermath of the imposition of capital controls in Malaysia, precipitated by the Asian financial crisis of mid-1997.
3 SIAS proved its worth in those dismal days. Together with the Singaporean authorities, it forged a measured response that ultimately brought relief to the many tens of thousands of affected investors.
4 That same steadfastness and resolution has enabled SIAS to sustain itself through its subsequent formative years. For that achievement, the Association has to thank its leadership, headed by the redoubtable Mr David Gerald and his executive team, ably supported by the large rank-and-file membership.
SIAS, a pillar of the financial establishment
5 The Association is now a respected member of the spectrum of institutions keeping a watchful eye on the capital market. Its views are eagerly sought by the media, hungry for news on every suspect shenanigan that hits our market. More than that, the Association girds itself to battle perceived injustices against retail shareholders, who form the backbone of its membership. Furthermore, it offers training courses, and even financial-counselling, to serious investors treating the capital market as a repository for their hard-earned savings.
Financial viability of SIAS
6 In taking up the cudgels on behalf of righteous causes, the Association occasionally singes the beards of mighty corporations. The consequences can at times be financially painful for the Association, but it has to stay its ground. As long as it sallies forth with prudence and justification, its conscience will be clear.
7 What those episodes suggest is that the Association must find independent means of survival. In the light of the battery of talented individuals that illuminates its leadership, the Association will surely be able to discover creative ways of independently securing its finances.
Governance is a collective responsibility of society
8 The pertinence of the Association lies in the fact that the whole of society -- not just the major financial and economic participants and regulators -- has to move forward, in harmony, towards higher standards of governance. Governance of capital markets is now not just a matter of formulating strict legislation and regulations, and rules and codes, important as those prescriptions may be. Add monitoring and supervision and watchdogs, and so forth, and that may still not be enough. The culture of good governance has to seep into the fabric of all the institutions in society. Only then can we move forward, collectively and with confidence, towards sustainable enhancement of behaviour through further prescription.
Standards high, but we may not relax
9 So, I expect that we shall, as a jurisdiction, advance in measured steps. We do not have to cast our eyes back 30 years to see how much progress we, in common with diverse countries around the globe, have made. Just ponder the changes that were wrought in Singapore in the past ten years. The progress was particularly noticeable with the transformation at the MAS in 1998, which produced much-needed reforms in the capital markets. We may now say, without exaggeration, that Singapore is in the front rank of jurisdictions exhibiting high standards of performance and governance.
10 By no means may we sit back and relax. The rest of the world continues to march forward. We have to keep abreast of the dramatic changes elsewhere. Participants in our capital markets, therefore, may not expect the pace of reform to flag. They will be held to increasingly higher standards with the passage of time.
Recognise the respective jurisdictions of shareholders, the board & management
11 To round off the story, let me speculate on what else is needed for a company to be able to deliver sustained performance. The focus is the three players that form the dramatis personae -- shareholders, the board, and management.
12 Shareholders are the owners, and therefore masters, of every company. They elect the directors of the board, who have the fiduciary responsibility of running the company in the best interests of the shareholders and other stakeholders. I say other stakeholders because unless those other constituencies are satisfied, shareholders will not be able to reap the full benefits of their investments. In any event, those stakeholders, too, are legitimate economic agents, deserving of respect.
13 The board, in turn, appoints a CEO, and delegates management authority and accountability to him. Thereafter it closely monitors performance. The board's duties include taking decisions on specific matters reserved by the board, and ensuring that directors are well informed of events and trends affecting the short-term and the long-term viability of the company.
14 Just as shareholders, even substantial shareholders, should not interfere with the independent functioning of the board, the board itself -- never mind the shareholders -- may not stray into areas that properly belong within management. That is a tricky business, and not many boards, or substantial shareholders, walk that tight rope with prudence.
15 If management is expected to deliver the goods, they must have the power to make truly independent recommendations to the board. It is then up to the board to accept or reject the recommendation, or in turn to make counter-proposals for management's reconsideration.
16 That way lies harmony between board and management, and between board and shareholders. Any degradation of that process inevitably leads to dysfunction. Instead of firing away on all cylinders, in proper sequence, the corporate engine will become untuned, and the sequence of firing unhinged.
A final appeal
17 That is all I have to say, except for one final attempt, on behalf of the SIAS leadership, to appeal to you, the members, to play a full and active part in the running of your Association. That responsibility, naturally, extends to contributing to SIAS's financial self-sustainability. There is a natural tendency for some to say, "I shall be a free rider; what do I lose?". If that attitude takes hold, what progress can the Association achieve? If SIAS perishes, one column of our financial edifice disappears. How would that benefit retail investors?
18 May I congratulate all the winners of awards, and wish all of you a happy and convivial celebration, not only of this dinner, but of your investment gains during the year. Some investors may not have enjoyed such a good year. Well, life is not an eternal bed of roses; thorns crop up occasionally. The prudent investor will pick himself up, go back to the first principles of investing, and persevere.
FTSE Mondo Visione Exchanges Index:
Mr J Y Pillay, Chairman Of SGX, Delivers The Keynote Address At The Securities Investors Association (Singapore) 6th Investors' Choice Awards 2005 Presentation
Date 12/10/2005