Thursday, 18 August 2011

Where is the Malaysian David Webb?

David Webb, a former investment banker who has lived in Hong Kong since 1991, is a well-known fighter for issues regarding Corporate Governance in Hong Kong. I recently went to KL to discuss Corporate Governance issues and his name fell several times in awe. Yes, we need somebody like him in Malaysia.

In what makes him different, he writes: "Investment banks and brokers are often conflicted from saying what they really think, because their comments would be negative to the companies or government concerned. This is not unique to Asia, it is an industry-wide problem. These firms get a lot of new issue and advisory business from corporate clients, and they also risk being shut off from information flow if their analysts are too negative on a company. Some analysts have even been fired for negative coverage of a company or government. If a firm offends a government, they are likely to lose future mandates for advising on things like bank restructuring or privatisations, and can even find difficulties with licensing and operating their business.
At, we don't have these hang-ups. We provide this site as a "pro bono" service to the community. We tell it the way we see it."

In Malaysia the problems are very similar, just take the "independent" reports as an example, they follow the majority shareholders in close to 100% of the cases, making them so biased that they are absolutely worthless (actually worse, they hurt the chances of the minorities that fight for their legitimate cases).

Webb's goals are:
  • to increase the transparency and efficiency of free markets and their participants, including companies, governments, regulators and controlling shareholders
  • to oppose all forms of cronyism, favouritism or protectionism by governments
  • to oppose anti-competitive behaviour by monopolies or oligopolies
  • to demand fair treatment for minority shareholders, to educate and inform them, and promote their participation in corporate decision making
  • to promote civil liberties, including freedom of speech, thought, assembly, movement and trade, the right to private property, and the democratic right to elect any office which has the power to interfere with those freedoms.

Where is the "Malaysian David Webb", we desparately need one

On his (in 1998 established) website  lots of interesting information is to be found, and all for free (it is run on a not-for-profit basis):
  • Database: simply type the number of the listed company and press "current" and a wealth of information is provided: Key Data, Officers, Overlaps with other companies, Advisers etc. It turns out that shady companies often use the same brokers, directors etc, so this is a very valuable service to the more serious investor. I have never invested in a HK company without checking David Webb's database.
  • "Our Stories": David's findings about listed companies, often he really digs deep to connect the dots. As far as I know, David has been right every time when he discovered dubious events in companies. By signing up for the free newsletter one is notified of new stories when they are published.
  • "Other News": official notifications regarding listed companies, their directors etc. However, often no names are added, but with the help of his huge database, David is able to add the name of the people and organisations involved.
  • In the Hall of Shame you will find the rolls of dishonour of those directors who served jail time as well as those who were found guilty of criminal offences but did not serve time:
My recommendation in the Malaysian context:
  • Increase transparancy by providing a Malaysian database similar to the one David Webb has provided on his website. This will be a useful tool for all serious investors and bring back their attention. Secondly, this will be a very useful tool for the enforcers themselves. Thirdly, journalists can tap from this source for their stories.
  • Start enforcing! In The HK hall of shame there are about 100 people, why are so few Malaysian directors of listed companies been jailed for offences? Finally some jail sentences have been given (I noticed relatively light sentences of 3 months, 6 months and 2 years jail), on one side a clear improvement from before when absolutely nobody was convicted, but this is still much too few. There must have been 10,000+ directors of listed companies in the last 20 years or so, punishing only 3 (and those still too light) is not a deterrent but more of an encouragement to break the rules and disadvantage the minority shareholders.

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