Monday, 22 October 2012

David Webb in The Business Times

Two large articles (one of which on the front-page) in The Business Times (Singapore) about David Webb, the shareholder activist from Hong Kong. The first article can be read here.

Let's not pretend any more that independent directors (IDs) are independent, says Hong Kong shareholder activist David Webb.

He suggests abolishing the requirement for IDs and letting them be called independent only after being elected by minority shareholders.

IDs need to make up at least one-third of boards in Singapore and Hong Kong to provide an objective voice to ensure management acts in shareholders' interests.

But Mr Webb, repeating a common criticism, says IDs are often picked because of their close relationship with controlling shareholders or board chairmen.

Shareholders are given "a sense of false comfort" as a result, says Mr Webb, 47, a retired investment banker who made his name in the past 14 years giving scathing, sharp and sometimes prescient commentary on the Hong Kong stock market through his website, "".

"Good companies will still put good people on boards, bad companies will always find three people who are willing to endorse anything," he says.

Mr Webb spoke to BT early this month when he was in town for this year's Corporate Governance Week organised by investor lobby group Sias, or the Securities Investors Association (Singapore).

Having IDs only electable by minority shareholders could improve corporate governance in both Singapore and Hong Kong, he says.

"The reality is that if candidates are voted upon by controlling shareholders, the candidates will only be those who are acceptable to the controlling shareholder. Then the whole system breaks down...

"It'll be more honest to say he's the old school friend of the chairman, family doctor, whatever, he's only there because the chairman likes him."

Under Mr Webb's system, controlling shareholders are not precluded from putting forward candidates they deem suitable, he notes - just that they have to abstain during voting.

This gives IDs a mandate to ask difficult questions without "being quietly asked to stand down", he says.

David Webb made the same point on his website before, see the third box "note to regulators". That article is about the excessive pay of the family of the "Managing Chairman" and majority shareholder of Hong Kong listed company Xpress Group Ltd, (currency in HKD):

Taking the 15 years together, the Chan family has taken pay of $492.8m, and the total profit attributable to shareholders was...well, there wasn't any. It was a total loss of $247.5m.

The second article about David Webb in The Business Times today can be found here (the whole story only for subscribers). Some parts:

He built up a formidable database on his website - which he started developing in 1998 after he retired from his investment banking job and found that the Internet had made it easy for him to publish his own views. "I've always been a bit of an activist," he says.

On his site, one can browse a list of directors and sort them by number of directorships, age, sex, and even the average returns o fall the past and present companies they have been directors of.

One can find out, for example, which company has the oldest average age of directors (Melbourne Enterprises), how many companies go beyond the minimum required number of three independent directors (less than one quarter), or who holds the largest number of independent directorships (Abraham Razack, 16 seats).

Investors can also track the number of companies incorporated each year, with the history going back to 1865. Company name changes are also recorded, and total returns for each company can be calculated and compared against each other.

The above database would be very helpful for investors in Malaysian (and Singaporean) companies. Either Bursa Malaysia or MSWG would be suitable for this task?


  1. Hi M.A. Wind,

    You would be surprised at the lack of information on the Malaysian stock market. Based on what little I've found, there's very little information on the Malaysian stock market apart from the fixation of stock prices and stock volume.

    I don't think there's even a comprehensive database on fundamental information such as sales and profits on the listed companies that goes back more than six years. There doesn't seem to be any organization that's keeping track of historical records going back to say 80's or 90's either. Those information is probably laying in either public libraries or scattered in various households. To find basic financial information, I had to resort to hunting down some books in 2nd hand bookshops.

    Another pet peeve of mine is that our Malaysian SC did not publish more detailed reports about some of the accounting issues in some listed companies such as Transmile and Megan Media as highlighted by No Money. It would be really interesting to compile these information and publish them into a book, don't you think?

    If there was someone like David Webb in Malaysia, it would be really nice. Hmmm... I wonder how much work it would involve to start out something similar on a much smaller scale... Any sample of the information contained in his database? I'd like to have an idea of what this would involve.

  2. It is indeed amazing that David Webb (working only half the time on this) plus one other person can pull the database off in Hong Kong, with about 1,500 listed companies.

    Yes, the SC didnt write much detail about the accounting issues. Anyhow havent heard much of the more recent cases.

    But the SC also hardly wrote on many strange CG issues where the public expected a company and/or its directors to be punished which didnt happen. It should have explained why no action was taken. The SC is judge, jury and executioner, but every judge has to write the basis of the judgement, also if the judgement is "not guilty".

  3. If Webb can do this, I don't understand why Bursa or MWSG could do this. I had a look and it's quite an amazing feat.

    On the financial misstatements cases and corporate failures, it's really disappointing to note that the SC didn't publish their detailed findings. I believe Moolah's blog actually has more information that what is available on the SC's site.

    It would be better if more information was made available to the general investing public. At least it would help investors avoid the more obvious problematic companies.