Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) and Newcrest Mining Ltd head up a list of 40 large companies with the best corporate governance in the Asia-Pacific region, according to a study conducted by CLSA Asia-Pacific Markets.
The two highest-ranked Asian markets are Singapore and Hong Kong, according to the study, which was conducted in conjunction with the Asian Corporate Governance Association. The “excessive” influence of billionaire-owners in the region has been a stumbling block to better governance, the report said.
A series of scandals plaguing companies from Japan’s Olympus Corp to Hong Kong’s Sun Hung Kai Properties Ltd (新鴻基地產) erased billions in market value, heightening awareness of corporate governance among investors. Short-sellers have also targeted Chinese companies including Sino-Forest Corp (嘉漢林業), suggesting that accounts have been manipulated.
“We’re still allowing companies to list that arguably shouldn’t be listed,” Asian Corporate Governance Association secretary-general Mark Allen said yesterday at a press conference in Hong Kong. “We need to have a better IPO process in Hong Kong and Singapore.”
Family control of companies in Asia are a source of conflict of interests, while the “excessive” influence of billionaire owners has hindered regulatory reforms, the report said. About half of the 864 companies covered in the report are controlled by shareholders whose primary financial interest is not in the listed company.
“The risks come when the controlling shareholder has a lot of other interests and might use the listed company to help out the private interest,” Amar Gill, CLSA’s head of Asia research, said at the conference yesterday.
The average profit-to-earnings ratio of markets deemed to have better corporate governance is 14, compared with 12.6 for those with lower scores, according to the report. Other companies that scored well for corporate governance include Tokyo Gas Co, BHP Billiton Ltd, Public Bank Bhd, HSBC Holdings PLC and Standard Chartered PLC, according to the report.