ASEAN Corporate Governance Scorecard 2021 Updates

On February 11, 2021, the Securities and Exchange Commission (SEC) held a conference to announce SEC strategic plan 2021-2023, chaired by Finance Minister Arkhom Termpittayapaisith.  At the event, four Thai listed companies were granted ASEAN Top 20 PLCs award, part of the ASEAN Corporate Governance Scorecard (ACGS) 2019 conducted by the Thai Institute of Directors Association.  In the 2019 assessment, Thailand continued to receive the highest score in ASEAN for the sixth consecutive times.  Moreover, 42 Thai listed companies were granted ASEAN Asset Class Award out of total 135 regional companies, making Thailand ranked first among six participated ASEAN countries for this award that granted to companies with 97.50 scores and above.

The assessment reflected how good corporate governance has been adopted as ASEAN standard that member countries agreed upon.  ASEAN has been pushing for regional listed companies to implement good governance because it is essential for long-term business sustainability.  Considering CG development in Thailand (Corporate Governance Reporting: CGR) and ASEAN (ACGS) in recent years, CG levels in Thailand has been continuously improving in all segments.  Regional peers with ACGS scores close to Thailand such as Malaysia and Singapore also continued to register CG improvement over the years.  (Out of 130 scores in 2019 ACGS shown in figure 1, Thailand got 96.60 scores while Malaysia got 94.99 and Singapore got 88.27)

The IOD would like to emphasize two interesting CG aspects of the two countries that Thailand can improve and apply with Thai listed companies.  Considering details of the CG Codes imposed by the three countries (Thailand, Malaysia, and Singapore), all emphasize on sustainability and long-term value creation in economic, environmental, and social dimensions.  All three countries have developed their own CG Codes as well as constantly improved and educated their respective listed companies.

However, CG Codes of the three countries have slightly different strong points.  For example, Thai CG Code focuses on applying innovation and technology to build competitiveness while responding to demand of stakeholders appropriately and safely.   This is in alignment with current situation that requires businesses to adjust to the digital world.   The Thai CG Code also emphasizes on anti-corruption, requiring companies to conduct policy and clear guidelines as well as communicate to people in all levels to ensure actual implementation and promote companies to join anti-corruption network.  

Regarding CG Codes of Singapore and Malaysia, they require that Chairman and CEO of companies be different individual.  Singapore stipulated in the listing rules that that relationship between Chairman and CEO must be disclosed in case they are immediate family or have close relationship.   As for Thailand, the SEC has issued regulations, effective in 2021, requiring that Chairman and CEO of companies offering initial public offering (IPO) must not be the same person.   To mitigate potential impact on listed firms, the Capital Market Supervisory Board agreed at its 3/2564 meeting on February 16, 2021 to allow Chairman and CEO of companies listed prior to January 1, 2021 to continue being the same person until there is a change in Chairman or CEO positions or their terms expire, whichever occurs first.

Besides Chairman and CEO point, Malaysia CG Code also indicated that companies must disclose policy on gender diversity of the Board and required that board of large companies listed on the FTSE Bursa Malaysia Top 100 Index and those with market capitalization over two million Malaysian Ringgit have at least 30% female directors.  Thailand and Singapore have not yet set specific quota for female directors but promote companies to consider Board diversity in various aspects including skill, experience, gender, and age etc.

Besides stipulated criteria in CG Codes of Malaysia and Singapore, companies in the two countries started to set performance-based compensation policy with claw back provision and deferred variable bonus policy.  According to ACGS 2019, no Thai company was found to have set compensation policy with claw back provision.  Perhaps this was difficult in the Thai context and any amendment after signing contract could violate labor law or affect tax calculation.  However, we found from a survey with a number of listed companies that some companies have also set deferred bonus policy as they think it would make management be alert in performing their duties.  However, some companies think paying annual bonus as usual remain an appropriate method because certain investment do not yield outcome within the year but will yield fruitful result in 3-5 years in the future.  Therefore, deferred variable bonus policy will not appropriately reflect current performance.  However, companies must take into consideration the appropriateness of different businesses in applying claw back provision and deferred variable bonus policies.

Comparing Thai listed companies with those in Malaysia and Singapore, Thai companies still have room to develop certain CG aspects such as the separation of Chairman and CEO positions, Board Diversity in terms of gender, and management compensation payment.   Over the past year, the IOD and regulators worked together to reiterate and educate listed companies about these matters as well as review and improve supervision criteria to meet international standard.  The IOD also arranged series of seminars, issued several guidelines, conducted workshops on CGR and ACGS criteria.  This year, the IOD is preparing ACGS eLearning Clip Video to provide thorough understanding about ACGS criteria and will distribute on the Thai IOD’s website within the first quarter.

          Under ACGS 2021 program, the IOD will assess 100 Thai listed companies with highest market capitalization as of May 31, 2021.  Participating companies must have relevant English-language documents distributed on their websites.  More information about ACGS can be found at the following websites,

Thai IOD:   https://thai-iod.com/th/projects-2-detail.asp?id=686 and

ACMF: https://www.theacmf.org/initiatives/corporate-governance/2019-asean-corporate-governance-scorecard-acgs-awards

References

1. Corporate Governance Code 2017, Securities and Exchange Commission (SEC)
2. Securities Commission Malaysia, 2017, Malaysian Code on Corporate Governance
3. The Monetary Authority of Singapore (MAS), 2018, Singapore Code of Corporate Governance

Aurakarn Jungthirapanich
Senior CG Analyst – Research and Development
Thai Institute of Directors Association (IOD)