Asia’s shining stars in corporate governance

Okay, here’s a little quiz I suspect you’ll find rather interesting…

The latest Corporate Governance Watch 2016 findings for Asia have just been released, with rankings provided for the 12 key Asia-Pacific markets and over 1,000 companies operating across the region.

Can you name the companies, preferably in alphabetical order?

Just kidding, what I’d like to know is who you think came out tops, who took silver, who grabbed the last remaining spot on the podium and who picked up the dreaded wooden spoon?

I’ll help a little by naming the 12 finalists!

Australia was included in the assessment for the very first time but our standing as clearly the most robust governance ecosystem in Asia meant our score was used solely to provide a benchmark and highlight some of the areas the other countries might need to focus on as they strive for best practice governance.

The remaining 11 were China, Hong Kong, India, Indonesia, Japan, Korea, Malaysia, the Philippines, Singapore, Taiwan and Thailand.

Okay, so who are your top three – and who brought up the rear?

Well, Singapore came out tops, knocking previous winner, perennial star performer and title holder Hong Kong from its pedestal and into second place, largely on the basis that it lacks an independent audit regulator. Japan then occupied third spot.

The medal-winning trio was followed by Taiwan, Thailand, Malaysia, India, Korea, China and the Philippines, with Indonesia coming in last.

Corporate Governance Watch 2016 is the most comprehensive assessment of corporate governance performance, issues and trends in Asia and is produced by the Asian Corporate Governance Association (ACGA) and brokerage and investment group CLSA.

It assesses markets based on a country’s cumulative score across the five categories of corporate governance rules and practices, enforcement, the political and regulatory environment, accounting and auditing and, finally, corporate governance culture.

It found that those who perform best and deliver better outcomes are characterised by a collective interaction between all parties and a system that demands accountability and compliance.

So what does all this mean…do those with better scores deliver higher share prices and superior results for shareholders?

Well, in the words of CLSA head of sustainable research Charles Yonts, yes.

He says that while there may be no proven link between better governance and higher share prices as other factors may also affect the stock’s standing, strong fundamentals are linked to better governance.

He adds that CLSA analysis shows companies that achieve higher Environment, Social and Governance (ESG) scores perform better on earnings revision and payout while exhibiting better free cash flow quality and lower balance sheet risk.

His conclusion: over time, these companies would perform better.

Your quiz results?

Until next time,

Kate.

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