News

23/12/2008

Letter to Editor of Business Times in Singapore, by GO's regional advisor in SE Asia, Tan Lye Huat

Governance oversight needed more than ever

Business Times, Singapore

17 December 2008

I REFER to the article 'Don't get Madoff, get even' (BT, Dec 15) and suggest that it will almost and probably always be too late 'to get even' by the time a financial explosion hits the market. I fully agree with the writer that questions such as 'Didn't they do due diligence? Didn't they spot the red flags that might have suggested that something was fishy?' should have been asked in the first instance.

We, together with our principals, Governance for Owners LLP of the UK, have constantly preached the concept and the need for shareowners to exercise 'ownership responsibility'. Trustees of funds also need to exercise rigorous stewardship on behalf of their ultimate owners over the governance at their investee companies around the world.

Unfortunately, institutional investors and fund managers are either sceptical of the efficacy of such a practice, conflicted, unable to undertake such responsibilities on their own accord or unwilling to overcome the 'free-rider' problem. A few enlightened ones are, however, beginning to recognise the benefits and cost-effectiveness of overlaying their global or regional portfolios with the standard of governance oversight, as suggested by the writer, on behalf of innocent owners.

Indeed, some regulators and other key stakeholders in our neighbouring countries have banded together to motivate and influence institutional and retail investors, through respective best practice guides, to 'start getting mad with their fund managers or investee companies now before it gets too late'. As the saying goes, prevention is better than cure.

I hope that our regulators, fund managers, institutional and retail investors can wake up to this powerful potential tool that can certainly assist in preventing unwanted financial explosions of the kind experienced elsewhere, before it is too late.

Tan Lye Huat

CEO, HIM Governance