Efforts to engage investors pay off

Source : Business Time - 13 Oct 2008

Property giant CapitaLand believes that in volatile times, firms should improve communication levels to keep investors in the loop

CORPORATE governance is a lot easier to put into practice when the economy is doing well and companies are making fat profits. But when financial markets are shaky, the economy is slowing and the bottom line is shrinking, it’s no surprise that corporate governance slips down the priority list.

On the flip side, sound corporate governance practices take on greater significance for investors, given the current economic climate, says property giant CapitaLand.

‘As the environment becomes more volatile, companies with robust risk management policies will ride the volatility better and provide greater safety to investors,’ says CapitaLand’s senior vice-president for legal affairs, Low Sai Choy. Also, a company with strong corporate governance has a lower cost of capital, which is a competitive edge should it turn to capital markets to raise funds.

CapitaLand is no stranger to bad times. Weathering the Asian financial crisis in 1997 and the economic slowdown from 2001 and 2003 proved to be a valuable learning experience that led it to bolster its corporate governance practices and risk management policies.

‘For CapitaLand, good corporate governance means having sound and transparent policies and practices to meet specific business needs and provide a solid foundation for trust and respect,’ says Mr Low.

‘The application of good governance in CapitaLand is underpinned by sound internal controls and accountability that help promote and drive long-term sustainable growth and shareholder value.’

For instance, CapitaLand has a board committee that reviews its risk portfolio and risk levels, as well as a department that assesses the risk of major projects.

Other initiatives include linking part of executive remuneration to company and individual performance by way of shares and EVA- based compensation, and having a board on which the majority of directors are independent and non-executive.

‘We believe it’s important to go beyond the letter of the regulations and embrace the substance and the spirit of corporate governance,’ says Mr Low. ‘For instance, CapitaLand embarked on quarterly reporting before it became compulsory.’

Efforts to engage investors have not been restricted to Singapore. In the past year, top management has conducted over 680 meetings with institutional investors and taken part in investor conferences in New York, London, Hong Kong, Beijing, Shanghai and Abu Dhabi.

An investor relations team, aided by the corporate communications and secretariat departments, has worked to engage all investors.

‘In such volatile times, companies should increase their levels of communication and keep investors abreast of developments,’ Mr Low notes.

CapitaLand is also conscious of the need to release timely and comprehensive information to stakeholders. Early on, the company established a board committee that reviews the promptness and clarity of corporate disclosures, as well as announcements released to the Singapore Exchange.

These policies and practices also extend to overseas operations and other entities of the group.

Such efforts to maintain strong corporate governance have paid off. CapitaLand received a merit award for corporate governance at this year’s SIAS Investors’ Choice Awards and came away tops in the property category for most transparent company.

For corporate governance, companies were assessed against a checklist developed from the Singapore Code of Corporate Governance, and they scored extra points if they took the initiative to implement best international practices.

The most transparent company award has different industry categories and looks at criteria such as timeliness, substantiality and clarity of news release, as well as degree of media access, frequency of corporate results and availability of segmental information and communication channels.