Good article from Business Times (emphasis mine):
http://www.btimes.com.my/Current_News/BTIMES/articles/RAYADEEN/Article/index_html
Good corporate governance is a key criterion for institutional investors when analysing companies to invest in, says Aberdeen Asset Management
Kuala Lumpur: Institutional investors are keen on companies with good corporate governance (CG) and are willing to pay top dollar to invest in them but sadly, few fit the criterion in Malaysia, says Aberdeen Asset Management, one of the country's top investment firms.
"We care about things like GCG because a company with sound governance policies will outperform over the longer term. We don't mind paying a premium for CG because we know there'll be a board that will always be watching our backs," said Abdul Jalil Rasheed, its head of equities, who helps manage US$2.5 billion (RM7.5 billion) of assets at the firm.
He said CG is a key criterion for Aberdeen when analysing companies to invest in.
"If it fails our CG test, we won't invest in the company," he remarked.
"We care about things like GCG because a company with sound governance policies will outperform over the longer term. We don't mind paying a premium for CG because we know there'll be a board that will always be watching our backs," said Abdul Jalil Rasheed, its head of equities, who helps manage US$2.5 billion (RM7.5 billion) of assets at the firm.
He said CG is a key criterion for Aberdeen when analysing companies to invest in.
"If it fails our CG test, we won't invest in the company," he remarked.
Jalil, who has been with Aberdeen for eight years, said the firm visits at least 100 companies a year in each key country in its quest to find undervalued stocks with good fundamentals to invest in.
"It's not as easy as you'd think," he shared. "We're long-term, fundamental, bottom-up investors ... so investing in the right company is key."
In Malaysia, Aberdeen's major investments include AEON Co (M) Bhd (15 per cent stake), Public Bank Bhd (5 per cent), CIMB Group Holdings Bhd (5 per cent), British American Tobacco Malaysia Bhd (5 per cent), Guinness Anchor Bhd (about 7 per cent) and Pos Malaysia Bhd (6 per cent).
Aberdeen has some RM11 billion invested in 29 companies here, Jalil said.
At a recent accounting-related conference held here, he shared his views on what institutional investors like Aberdeeen want to see in companies, especially on the matter of CG.
"We ask if a company will still be in the same business in 20 years' time. And if it's got a good track record, is it run fairly for all shareholders, and are they transparent? How independent are the board of directors?
"What we want are directors that are knowledgeable of the industry. We want experienced and really independent people. There are some companies out there where the independent directors are former employees of the company - it's not wrong, but it's not right in the spirit of corporate governance," he remarked.
Jalil noted that boards play a key role in setting the CG tone for the company, and so directors shouldn't be sitting on boards for too long as investors would then find it difficult to see them as being truly independent.
"Changing board members is a good thing ... it brings a rejuvenation of the board. Younger board members would bring in new perspective," he voiced.
Another problem commonly seen by investors is companies providing sparse information in their quarterly financial reports.
"They should at least have a performance commentary on how the company has done in the past quarter. We see similar words being used in almost every quarter," he lamented.
Jalil said institutional investors like Aberdeen would also like to see a more transparent voting process at shareholder meetings, like a poll voting system.
He noted that Singapore has made it mandatory to vote by poll and have the results audited by an independent auditor. "I hope this is something we can move to," he said.
Jalil said it would also be good for independent directors to be given a few minutes to explain the operations of the company to shareholders at annual general meetings. "We have seen this in Thailand, and to a certain extent in Singapore.
"In Malaysia, they are rather quiet ... it would be nice if they were given a bit of airtime," he suggested.
Jalil opined that in Malaysia, companies do the bare minimum when it comes to CG. "It's more about form than substance, a mere box-ticking exercise, and I think that's wrong. If you want to adopt CG, you've got to do it in the right spirit," he said.
"It's not as easy as you'd think," he shared. "We're long-term, fundamental, bottom-up investors ... so investing in the right company is key."
In Malaysia, Aberdeen's major investments include AEON Co (M) Bhd (15 per cent stake), Public Bank Bhd (5 per cent), CIMB Group Holdings Bhd (5 per cent), British American Tobacco Malaysia Bhd (5 per cent), Guinness Anchor Bhd (about 7 per cent) and Pos Malaysia Bhd (6 per cent).
Aberdeen has some RM11 billion invested in 29 companies here, Jalil said.
At a recent accounting-related conference held here, he shared his views on what institutional investors like Aberdeeen want to see in companies, especially on the matter of CG.
"We ask if a company will still be in the same business in 20 years' time. And if it's got a good track record, is it run fairly for all shareholders, and are they transparent? How independent are the board of directors?
"What we want are directors that are knowledgeable of the industry. We want experienced and really independent people. There are some companies out there where the independent directors are former employees of the company - it's not wrong, but it's not right in the spirit of corporate governance," he remarked.
Jalil noted that boards play a key role in setting the CG tone for the company, and so directors shouldn't be sitting on boards for too long as investors would then find it difficult to see them as being truly independent.
"Changing board members is a good thing ... it brings a rejuvenation of the board. Younger board members would bring in new perspective," he voiced.
Another problem commonly seen by investors is companies providing sparse information in their quarterly financial reports.
"They should at least have a performance commentary on how the company has done in the past quarter. We see similar words being used in almost every quarter," he lamented.
Jalil said institutional investors like Aberdeen would also like to see a more transparent voting process at shareholder meetings, like a poll voting system.
He noted that Singapore has made it mandatory to vote by poll and have the results audited by an independent auditor. "I hope this is something we can move to," he said.
Jalil said it would also be good for independent directors to be given a few minutes to explain the operations of the company to shareholders at annual general meetings. "We have seen this in Thailand, and to a certain extent in Singapore.
"In Malaysia, they are rather quiet ... it would be nice if they were given a bit of airtime," he suggested.
Jalil opined that in Malaysia, companies do the bare minimum when it comes to CG. "It's more about form than substance, a mere box-ticking exercise, and I think that's wrong. If you want to adopt CG, you've got to do it in the right spirit," he said.
"In Malaysia, Independent Directors are rather quiet", that must be the understatement of the year.....!
Aberdeen is indeed a good fundmanager, their results in Asia are very decent. Here is the Factsheet for their Malaysian Fund, including their Top 10 holding: Aeon, CIMB, United Plantations, Public Bank, Hong Leong Bank, Panasonic Manufacturing, LPI Capital, Digi.com, United Malacca, F&N Holdings.
http://www.aberdeen-asia.com/doc.nsf/Lit/FactsheetSingaporeOpenAMEF
I would rather recommend their Pacific Equity Fund:
http://www.aberdeen-asia.com/doc.nsf/Lit/FactsheetSingaporeOpenAPCF
The geographical spread is better, and the outperformance over the relevant index is more convincing.
However, buyer beware, do not pay the 5% commission charge, and negotiate it down to 2% or lower. Paying the maximum 5% commission on the purchase of a unit trust is simply outrageous, it is like paying an agent a commission of 6 months rental to find a prospective renter.
Aberdeen did in the past fight for its unit trust holders; it managed to squeeze out an extra RM 2 per Malaysian Oxygen Bhd (MOX) share, from RM 15 to RM 17. This was a very rare, small victory for Minority Investors in Malaysia.
They did this together with EPF, one of the rare cases I have seen EPF being active coming up for its investors. Aberdeen owned 9.5% of the MOX shares, EPF 8.6%, so together they could form a block. EPF, PNB, LTAT, Ministry of Finance, etc. could have done this in so many similar cases, either blocking a General Offer with delisting threat for a too low price or blocking a horrible Related Party Transaction where an asset was acquired for a much too high price, but they have very rarely done so. They have also not been transparent at all about their actions. The passive attitude of these funds (hurting returns for their own investors and other Minority Investors) is one of the problems in the Malaysian market, they could learn something from Aberdeen.
I hardly can appreciate what the current independent directors role in Malaysian companies. They are either appointed by major shareholder or related parties, so wondering what make them so special and receiving their remuneration.
ReplyDeleteSome of them even sits on so many companies, do you think they really can contribute in such circumstances?
In one word: No.
ReplyDeleteSad but true, I don't have any prove at all that they are doing their job in Malaysia. May be, they do some useful work behind the scenes (I hope so), but never in the limelight.
In the huge amount of deals that were clearly bad for the Minority Investors, independent directors could have been vocal, they could have voted against the deals, or even resigned. But they didn't. Never. The only act I have witnessed was directors resigning, all 4 that I am aware of were foreigners.
SC & BM focus a lot on directors, they hope to improve their attitude by training etc. It would possibly preempt problems. But unfortunately, I just don't see it work. I think the benefits will be very limited.
I therefor like to focus on the big, bad cases where investors are treated badly, and want SC & BM to actively enforce, both for some justice and as a deterrent: name them, shame them, punish them.
This is from M'sian BT:
ReplyDeleteTop ringgit for head honchos
By Roziana Hamsawi Published: 2011/08/17
The top 20 companies on Bursa Malaysia forked out RM455.6 million to directors last year in terms of total payout, up 22 per cent from 2009.
KUALA LUMPUR: Directors in public-listed companies got paid more last year compared to the year before.
Malaysian Business, in an annual survey of the "highest paid directors" published in its August 16 issue, said the top 20 companies on Bursa Malaysia forked out RM455.6 million last year in terms of total payout, up 22 per cent from 2009.
Out of more than 600 companies surveyed, close to 270 directors raked in more than RM1 million in remuneration in 2010.
The survey lists a total of 630 companies with remuneration band of RM300,000 and above as stated in their respective annual reports.
Malaysian Business noted that only a handful of the companies were transparent in stating the exact remuneration of their top executives.
"Interestingly, several companies with huge losses still rewarded their directors with huge payouts," it said in a press release yesterday.
Genting Bhd topped the list with a big payout of RM111.48 million to its board, 21 per cent higher from the previous year.
IOI Corp Bhd came in second with a total payout of RM56.29 million, 71 per cent more from the year before.
Genting also had the highest remuneration band of RM106.65 million to RM106.7 million for a single director but did not name who the director was. The top executive listed is its executive chairman/chief executive officer Tan Sri Lim Kok Thay.
Other companies with the highest remuneration band for a single director were IOI Corp, which paid out a remuneration band of RM53.05 million to RM53.1 million to its highest ranking director. This was higher compared to RM25 million to RM30 million it paid out in 2009, presumably to its director and founder Tan Sri Lee Shin Cheng.
Genting's subsidiary, Genting Malaysia Bhd, which paid out more than RM42 million to its top executive, took the third spot.
Thanks Ronnie, I don't like to see these much too high wages for managers, especcially when they are also majority shareholders, which is often the case in Malaysia.
ReplyDeleteMore from Ze Moola on this subject:
http://whereiszemoola.blogspot.com/2011/08/incredible-growth-in-malaysian-ceo-pay.html
I will blog about this soon.