2011
Proxy Season
Preview
Key Takeaways

In Singapore, a few companies are voting by
poll, but the majority still decides general
meetings on a show of hands, effectively
disenfranchising international investors.

Malaysia has moved to close a listing rules
loophole, and now requires that companies
seeking to take over a listed firm by buying
its assets must get approval of at least 75
percent of the target company’s shareholder as opposed to a simple majority, as was
previously the requirement.

Poor disclosure remains a concern in Indonesia, given weak disclosure requirements.
Information on directors is rarely provided,
and the elections of directors are typically
bundled.

The Philippines Stock Exchange launched a
new set of Corporate Governance Guidelines on Nov. 26, 2010, with the market also
looking to introduce the "Maharlika Board,"
with a higher set of corporate governance
standards.

The level of disclosure in Vietnamese annual reports is inadequate, with these reports
rarely including a director profile or a separate corporate governance report.
Southeast Asia
Report Authors
Indonesia and Thailand
Geraldine Yazon geraldine.yazon@issgovernance.com
Victor DyEcho
victor.dyecho@issgovernance.com
Malaysia
Victor DyEcho
victor.dyecho@issgovernance.com
Khristina De Castro
khristina.decastro@issgovernance.com
Philippines
Neva Arboleda-Santos
neva.arboleda@issgovernance.com
Singapore
Jaja Figueroa
jaja.aquas-figueroa@issgovernance.com
Vietnam
Christina Montemayor
christina.montemayor@issgovernance.com
Singapore
Key Issues
Proxy Voting Method
Voting by a show of hands continues to be the
norm in the market although a few companies
have started using poll voting during the 2010
season. Index companies such as Singapore Telecommunications Ltd., Oversea-Chinese Bank Ltd.,
2011 Proxy Season Preview: Southeast Asia
Singapore Technologies Engineering Ltd., and
Neptune Orient Lines Ltd. employed poll voting in
2010, following the likes of Singapore Exchange
Ltd. (SGX), Fraser and Neave Ltd., City Developments Ltd., and Noble Group Ltd., which started
using the one-share, one-vote system earlier.

The introduction of a criterion that a director
may not be considered independent after
serving on the board for a continuous period
of nine years, with effect from the 2012 AGM
of each financial institution;

An increase in the number of independent
directors on the board, nominating committee
and remuneration committee from the current one-third to a majority, with effect from
the 2012 AGM of each financial institution;

Additional guidance to emphasize that the
roles and responsibilities of the nonindependent chairman of the board and lead
independent director should be properly
spelled out so as not to diffuse board leadership; and

Additional guidance on the establishment of a
dedicated Board Risk Management Committee
comprising at least three directors, the majority of whom must be non-executive, with at
least two members possessing relevant technical financial sophistication in risk disciplines or business experience.
Legislative & Regulatory
Developments
Equity Fund Raising – Rights Issues
In consultation with the Monetary Authority of
Singapore (MAS), in January 2009 SGX introduced
measures to facilitate equity fund raising by listed
companies amidst the global credit crisis. The
measures were valid for two years until Dec. 31,
2010.
With effect from Jan. 1, 2011, the general mandate
given to listed companies limits the issuance of
new shares on a pro-rata basis to 50 percent of
current outstanding capital, removing the authority to issue up to 100 percent when issuing shares
via a renounceable rights issue. In addition, major
shareholders are no longer allowed to enter into
sub-underwriting arrangements and receive subunderwriting fees to take up their rights entitlements and/or sub-underwrite excess rights shares
in connection with a rights issue.
Revisions were made following the close of a public consultation in April 2010 in which 20 respondents
including 11 financial institutions
and Temasek Holdings Pte. Ltd. participated.
Revised Corporate Governance
Regulations and Guidelines for Financial
Institutions
Malaysia
In December 2010, MAS released revisions to the
Banking (Corporate Governance) Regulations
2005 and Insurance (Corporate Governance) Regulations 2005 (collectively referred to as "the
Regulations") applicable to all banks, financial
holding companies and direct insurers incorporated in Singapore (Financial Institutions) and
Guidelines on Corporate Governance (Guidelines)
applicable to financial institutions listed in Singapore. Key revisions to the Regulations and Guidelines include:
Key Market Characteristics
Published March 23, 2011
Key Issues

Most companies have boards that are composed of at least one-third independent directors. In addition, they maintain key board
committees, such as the audit, remuneration,
and nomination committees that are majority
independent (save for the audit committee,
which should comprise only of non-executive
directors).
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2011 Proxy Season Preview: Southeast Asia


According to the Companies Act, 1965, companies should hold their annual general meetings once a year and not more than 15 months
from the last annual general meeting; hence,
most (AGMs) are held in the month of June
given that most of the companies have their
financial year-end in December (main proxy
season).
management board composed of directors
who are responsible for the day-to-day management of the company.

A small number of companies have their yearend in March, which means they hold their
AGMs during the month of September (miniproxy season).
Legislative & Regulatory
Developments
Takeover Rules
Recent amendments to the Main Market Listing
Requirements provide that companies seeking to
take over a listed firm by buying its assets must
get the approval of at least 75 percent of the company’s shareholder as opposed to a simple majority vote (50 percent plus one) previously implemented.
It is believed that the new rule will ensure that
shareholders of listed companies will receive the
same degree of protection regardless of the chosen route to privatize a company.
Neighboring countries, such as New Zealand, Hong
Kong, and Thailand, already apply the 75-percent
threshold rule.
Indonesia
Key Issues
Key Market Characteristics

Annual general meetings (AGMs) are to be
held within a period of up to six months after
the financial year-end. Since most financial
books of companies close in December, most
AGMs are held between January and June of
each year with June being the busiest month
for AGMs. However, this has not stopped a
few companies having the above year-end
from holding their AGMs after June. In this
case, such companies normally seek shareholder approval for the dispensation on the
delay of the AGM.
Disclosure

Poor disclosure remains a concern in Indonesia due to the weak disclosure requirements
implemented by regulatory bodies such as the
Bapepam-LK, Indonesia's Capital Market and
Financial Institutions Supervisory Agency,
and the Indonesian Stock Exchange (IDX). For
example, the names and qualifications of director and/or commissioner nominees, which
are mostly presented as bundled proposals,
are often not disclosed prior to the meeting
since this is not required under the law.

Only information regarding material and connected transactions and mergers, consolidations, acquisitions or demergers are required
to be disclosed to the public. Such disclosure
should be released in public newspapers and
at the IDX prior to the invitation to the general
meeting of shareholders for the transactions.
Legislative & Regulatory
Developments
On the regulatory front, there has been no movement in Calendar 2010.
Issuers have a two-tiered board structure,
comprising (i) the supervisory board composed of commissioners who are responsible
for the oversight of management, and (ii) the
Published March 23, 2011
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2011 Proxy Season Preview: Southeast Asia
Philippines
Key Issues
The survey also points out the following weaknesses in the country’s corporate governance
practices:

Codes and Securities Laws in the Philippines
are not up to par with international and regional best practices by setting the bar low in
areas such as director independence. The
Amended Implementing Rules and Regulations of the SEC specify that all listed companies should have at least two independent directors or at least 20 percent of their members but in no case less than two. Presently,
Malaysia, Hong Kong, and Singapore require
boards of publicly listed to be no less than 33
percent independent.

Former executive directors may qualify as
independent directors after just a two-year
cooling-off period.

Regulators such as the SEC are not sufficiently
resourced and are generally regarded as
“toothless.”

Lack of enthusiasm for the Maharlika Board
and other Corporate Governance initiatives of
the PSE.
Removal of Preemptive Rights
Some companies are seeking to disenfranchise
minority shareholders by amending their bylaws
to remove the preemptive rights of their shareholders even if this right is encoded in the Corporations Code of the Philippines. In 2010, Ayala
Corporation (AC), International Container Terminal Services, Inc. (ICSTSI) and San Miguel Corporation (SMC) all passed resolutions that effectively
denied preemptive rights to their shareholders.
Resolutions seeking shareholder approval to deny
preemptive rights are almost always done under
an amendment of a company’s charter.
The Corporations Code of the Philippines allows
the denial of preemptive rights for the following
circumstances:
a. "Shares issued in compliance with laws
under stock offerings or minimum stock ownership by the public;" or
b. "Shares to be issued in good faith with the
approval of the stockholders representing
two-thirds of the outstanding capital stock in
exchange for property needed for corporate
purposes or in payment of previously contracted debt."
Credit Lyonnais Securities Asia (CLSA), in collaboration with the Asian Corporate Governance Association (ACGA), released Corporate Governance
Watch 2010 in September of last year and highlighted the denial of preemptive rights as one of
the key elements why corporate governance practices in the Philippines regressed in 2010. CLSA
expressed that corporate governance practice in
the Philippines is the “most disappointing” which
resulted in the country ranking last in the survey.
The report surveyed 580 companies in Asia and
11 countries including Japan.
Published March 23, 2011
The survey also notes that the Bangko Sentral ng
Pilipinas is “much more professional,” and is an
“indication of what effective local regulation can
look like.” The report also concluded that “most
institutional investors are yet to invest sufficiently
in voting, engagement or stewardship.”
Legislative & Regulatory
Developments
New Corporate Governance Guidelines
On the heels of the Corporate Governance Watch
2010 Survey of CLSA, the PSE launched a new set
of Corporate Governance Guidelines on Nov. 26,
2010. The new set of guidelines is a step toward
the creation of the Maharlika Board, which would
be the fourth board of the PSE that adheres to a
higher set of corporate governance standards. The
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consent of ISS.
2011 Proxy Season Preview: Southeast Asia
guidelines are implemented on a comply-orexplain regime where companies are required to
explain their non-compliance with the guidelines.
Listed companies are required to submit a disclosure template provided by the PSE annually starting Jan. 30, 2011.
The new guidelines include the following provisions which bring CG practices in the Philippines
up to par with its regional counterparts:

Boards must now have at least three independent directors or 30 percent of its board,
whichever is the higher.

The board should now have audit, risk, governance, nomination, and election committees.

The audit committee should approve all nonaudit services ensuring that non-audit fees do
not exceed the fees earned from external audit.

Provision of supermajority or “majority of
minority” voting mechanisms to protect minority shareholders against the actions of controlling shareholders.

Have at least 30 percent public float to increase liquidity in the market. The current
rule on public ownership is 10 percent.

Disclosure of director and executive compensation policy.

Disclosure of groups or individuals who hold
5 percent or more ownership interest in the
company, significant cross-shareholding relationship, and cross guarantees.

Disclose the existence of agreements that may
impact the control of the company.

Define thresholds for related-party transactions, considering the aggregate amount of related-party transactions under a 12-month
period as the basis for the threshold
Published March 23, 2011
A New Leadership at the PSE
Hans Sicat was announced as the new CEO of the
PSE in January 2011. His appointment came about
after the bourse’s former president, Val Suarez,
resigned due to conflict-of-interest issues. Suarez
stayed as the president for just five months after
the SEC fined the PSE more than Php1 million
primarily because Suarez was married to the president and managing director of JP Morgan Securities Philippines, Inc., a trading participant.
In an interview, Sicat said the bourse needs to
catch up with its peers in the region in terms of
liquidity, trading volume, interest and number of
products. He also stated his plans of continuing
the corporate governance initiatives of the board
including the Corporate Governance rule book and
the Maharlika Board. The new president also expressed his interest in the creation of new products, including a futures markets and exchange
traded funds.
Other Capital Market Developments

One of the major projects that the bourse is
undertaking this year is its link-up with the
planned ASEAN Trading Link which is expected to go live by the end of 2011. The regional trading system would initially involve
Bursa Malaysia, the PSE, the Singapore Stock
Exchange, and the Stock Exchange of Thailand. This project aims to link together these
markets thereby facilitating cross border
trading. The estimated value of the combined
markets is said to be $1.9 trillion and would
have the size and capacity to compete with
Hong Kong and Tokyo.

In October 2010, the bourse published the
Listing Rules for Real Estate Investment
Trusts (REIT). The SEC approved the adoption
of the Implementing Rules and Regulations
for REITs on May 13, 2010. The Bangko Sentral ng Pilipinas (BSP) announced earlier this
year that stand-alone trust units may now be
permitted to operate as part of the efforts to
increase the number of players in the local
capital market. Trusts have always operated
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2011 Proxy Season Preview: Southeast Asia
as subsidiaries or departments of local banks
prior to this ruling.
Thailand
Board of Management, the Board of Inquiry
and General Director.

The Model Charter of listed joint stock companies requires one-third of the board to be
non-executive directors. However, the concept of non-executive director is still new in
Vietnam and the definition of non-executive is
not clearly defined by law.

Currently, the level of disclosure in annual
reports is inadequate. Generally, annual reports do not include a director profile or a
separate corporate governance report.
Key Issues
Key Market Characteristics



The Principle of Good Corporate Governance
for Listed Companies, 2006 recommends that
companies have a minimum of three independent non-executive directors or equivalent to at least one-third of the board size.
However, up to this point there is still no law
mandating companies to maintain a certain
level of board independence.
Quite a number of Thai companies are still
closely held by controlling families who get
involved in management due to cronyism.
Annual general meetings are held within four
months from the end of the accounting year.
Since most Thai companies close their books
in December, most AGMs are held from January to April of each year with the latter being
the busiest month for AGMs.
Legislative & Regulatory
Developments
On the regulatory front, there has been no movement in Calendar 2010.
Vietnam
Key Issues
Key Market Characteristics

The corporate management in listed companies in Vietnam follows a two-tier structure
comprising a board of directors known as the
Published March 23, 2011
Legislative & Regulatory
Developments
Vietnam Corporate Governance Project
In an effort to improve corporate governance
practices in Vietnam, the World Bank's International Finance Corporation (IFC) implemented the
Vietnam Corporate Governance Project in October
2008 in partnership with Finland, Ireland, the
Netherlands, New Zealand, and Switzerland. As
part of this program, IFC published the corporate
governance manual and the corporate governance
scorecard for Vietnam in cooperation with the
country's securities market regulator, the State
Securities Commission and Global Corporate Governance Forum on December 8, 2010.
The corporate governance manual provides recommendations to shareholders, corporations, and
the government for implementation and monitoring of good governance standards.
The corporate governance scorecard is a baseline
review of the corporate governance practices of
the 100 largest listed companies in the Hanoi and
Ho Chi Minh City stock exchanges as of Jan. 1,
2009. These companies collectively account for
about 90 percent of the aggregate market capitalization of the said bourses. The companies were
evaluated on their compliance with Vietnamese
laws and regulations and against globally recog-
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2011 Proxy Season Preview: Southeast Asia
nized good corporate governance practices using
publicly available materials.
covered by existing laws and regulations are not
particularly addressed by companies.
The principal goal of the baseline review is to develop a standard measure of corporate governance in Vietnam and to identify the more significant areas for improvement in the quality of corporate governance of the country's publicly listed
companies. Other Asian countries such as China,
Hong Kong, Singapore, Thailand, Philippines, and
Indonesia have employed scorecards to improve
their respective corporate governance practices.
The baseline report offers the following recommendations, among others:

Intensive programs on issues such as relatedparty transactions and internal audit, controls
and risk management;

Extensive training for all participants in the
corporate governance field, for instance:
The scorecard assessed the participant companies
against these five criteria:

The rights of shareholders;

Equitable treatment of shareholders;

Role of stakeholders in corporate governance;

Disclosure and transparency; and

Responsibilities of the board.
These are the subject areas acknowledged by the
Organization for Economic Cooperation and Development Corporate Governance Principles as
the keys to good corporate governance.
In four of the five areas, overall results showed a
level of compliance below 50 percent. The area of
best compliance, with an overall level of 65.1 percent, is the equitable treatment of shareholders.
The lowest, with 29.0 percent, is the stakeholders'
role in corporate governance. Other areas with
subpar results are shareholders' rights – 46.8 percent, disclosure and transparency – 39.4 percent,
and board's responsibilities – 35.3 percent.

For directors, on regulatory requirements
of Vietnam and on globally recognized
best practices;

For shareholders, on their rights and the
exercise of those rights;

For regulators, on supervisory and enforcement practices; and

For the media, on raising public awareness of corporate governance issues;

Increased disclosure on the board's performance, remuneration, and independence;

Auditor election and participation at shareholders' general meetings;

Establishment of an audit committee; and

Regular scorecard reevaluation and publication of the general result of progress.
The results of the baseline review show that corporate governance in Vietnam is still at the incipient stage and that deeper knowledge is absent.
The baseline report also notes that corporate governance practice in Vietnamese companies is
largely compelled by compliance to regulatory
requirements more than a commitment to the
practice of sound governance. Thus, issues not
Published March 23, 2011
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2011 Proxy Season Preview: Southeast Asia
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