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Jun 30, 2001

Asian stars

An eyewitness account of our first Asian awards

The setting for the inaugural Investor Relations Magazine Asia Awards, the Regent Hotel on the Kowloon peninsula, offers a stunning view of Hong Kong island, giving a sense of its staggering architecture that you could never get standing among the buildings themselves. Similarly, the first Asian IR awards provided a wholly new and objective perspective on the region's companies. Indeed there was a pleasant sense of surprise among the 300 guests, as if they were saying yes, there is good IR in Asia after all. We were just too close to see it.

There is still room for improvement. Many an Asian company is like the sunburned tourist walking around in black knee socks and sandals, oblivious to the funny looks. And even the better-governed, more transparent companies are sometimes only better at revealing their knobby knees and poor business practices.

But at least these superior IR voyagers now acknowledge that they need to change their socks. Where once questions about corporate governance or online disclosure would have elicited blank looks, today they provoke candid analysis. 'We use our web page to communicate with investors, though not effectively, I have to admit,' confesses one Asian winner, who adds: 'I have plans to improve it.'

Another IRO, asked about his company's protection of minority shareholders, says ruefully, 'Frankly, the board of directors is still appointed by the government because it holds the voting shares.'

And where once companies only paid lip service to principles of transparency and governance, today many are genuine converts. Take Singapore's DBS Group, winner of several awards including most progress in IR, best board communications and best annual report. 'I don't think we're taking the leading role in terms of complying with governance guidelines,' admits Stanley To Bing Cheung, managing director of treasury and markets. But within the bank corporate governance is seen as a matter of principle and discipline. And, he adds, 'Good corporate governance is also very key because it reinforces our credibility among investors and earns their confidence.'

The corporate governance buzz in Asia has never been greater. Most recently, the region has been galvanized by research from CLSA Emerging Markets showing a strong link between stock price, earnings and corporate governance. While the stock prices of Asia's 100 largest companies fell an average 8.7 percent last year, the 25 companies rated best for 'CG', as it's known here, rose an average 3.3 percent, the worst 25 fell an average 24 percent.

Perhaps the biggest impact of that study, unveiled at CLSA's investor conference in May, will be felt as the region's companies absorb the significance of the 57 criteria CLSA used to rate corporate governance. Transparency tops its list; and indeed IR is seen as integral to the very concept of corporate governance. The two are constantly mentioned in the same breath, as in this proclamation from Harvey Chang, Taiwan Semiconductor Manufacturing Company's (TSMC's) CFO and the winner for best overall IR and best IRO: 'You can't just have IR and not corporate governance.'

Or this from Capital Group analyst Chris Thomsen at Spear Leeds & Kellogg's ADR workshop the morning after the awards: 'Bad corporate governance is often hidden by bad IR. They're interlinked. After management capabilities and vision, I look for corporate governance and investor relations in the companies I research.'

Timely retort

The big winner at the Asia awards was TSMC, which has clearly won the support of Asia's investment community and even the respect of hard-nosed commentators like awards MC, Bernard Lo, host of CNBC Asia's Squawk Box. The highly irreverent Lo exchanged good natured jibes with CFO Chang, who gave back as good as he got. When Chang accepted the Grand Prix, Lo asked a cheeky question about future earnings. 'This award is for our timely communications,' Chang said, 'and this is not the right time to answer that question.'

Chang took the prize for best IRO along with TSMC's chairman and CEO, Morris Chang - proof that IR is the responsibility of all senior management. According to survey respondents, TSMC has a 'high degree of corporate governance', it's a 'very well managed company' which is 'transparent' and 'they announce everything'. As for Chang, 'He is always forthcoming with all the information we desire.'

But what does Chang himself say? 'Of all the fundamentals, the one we really focus on is shareholder wealth. We want to make sure that shareholders understand the company and that the market reacts favorably to the information we release.' Several full-time IROs deliver 'the truth' to fund managers and analysts, while at the same time TSMC tries 'to be as positive as we can.'

Chang spends a high 20-25 percent of his time on IR, attending, for instance, some 15 broker-sponsored investment conferences last year. With an ADR on the Big Board and competitors like Intel, Chang is well aware of the pressures of Reg FD. 'It will definitely make us think. 'We're not actually regulated by it, but we want to observe Reg FD and adapt to the same standard. It doesn't bother us as much as it does the analysts, but we do need to be careful.'

Companies across Asia can look to TSMC as a standard-setter in both IR and the wider governance arena. 'Companies that really want to become globalized certainly have to start paying attention to IR,' confirms Chang, admitting that several CEOs have approached him to get his advice on their IR activities. 'But investor relations is just one part of corporate governance, and though Taiwanese companies are starting to pay attention to IR, their corporate governance is not quite there.' Prompted by this, Chang recently submitted an article to a Taiwanese newspaper encouraging other companies to focus on improvement.

New IR drive

In some cases, the survey respondents recognized a strong IR push by new management, as in the case of Indonesia's PT Telkom. Setiawan Sulistyono, head of investor relations, is proud that the executives who took over managing the telco last year are enthusiastic supporters of IR. They have recently been on two roadshows, including a 'non-deal' roadshow to Tokyo, Hong Kong and Singapore. The other trip was in conjunction with an Indosat transaction for which PT Telkom needed its minority shareholders' approval. That took Sulistyono and his management team to Hong Kong, Singapore, London and the US.

'We have tried to open everything to investors,' says Sulistyono, who heads up a 13-person department including four other managers. 'We also learn from them what they like and what models they use, then try to fulfill their needs.' However Sulistyono seems chagrined that he's not allowed to supply management's earnings projections to the investment community.

One of the awards given out in Hong Kong was to be shown off in a village pub in the north of England before traveling home to the Philippines. The well-traveled trophy belongs to Nick Thompson, advisor to the president of PLDT (Philippines Long Distance Telephone), an ex-pat who was business editor of the South China Morning Post before becoming an IRO at the Wharf Group in Hong Kong. He then did a stint in investment banking at ABN-Amro before winding up back in IR at PLDT, which won best IR by a Philippines company.

Thompson attributes PLDT's success in the awards survey to the influence of its controlling shareholder, Hong Kong's First Pacific Group. 'Even before corporate governance became the big buzz word it is now, First Pacific had a policy of transparency and openness, and that has crossed over into PLDT,' he says.

For instance, PLDT produces a quarterly MD&A 'as a matter of good financial discipline,' though the requirement is for a semi-annual MD&A.

In particular, Thompson gives credit for the award and for PLDT's policy of openness to PLDT's CEO, Manny Pangilinan, who is also executive chairman of First Pacific, as well as CFO Chris Young. 'A lot of what we heard today at the conference was about trying to get senior management on board,' Thompson observes. 'At PLDT, senior management support of IR is huge, with very active participation and daily conversations on the subject.'

Eastern wisdom

The country commendation for the best IR by an Indian company went to Infosys, the Nasdaq-listed tech firm from Bangalore. PR Ganapathy, head of finance and administration, explains why: 'It's our intention to deliver the greatest value to all stakeholders in an ethical and transparent manner, communicating frequently and openly, providing access to every level of management along with a fine understanding of the business. This award is vindication of the wisdom of that philosophy. The market's respect for us as a company, and for the management team's ability to manage the business, is a consequence of that transparent communication.'

Just as Infosys has always sought to benchmark itself against the disclosure norms of the best companies worldwide, it's now a standard-setter in India and even the US. 'A lot of our disclosure is way ahead of what is legally required and what is normal for companies in our industry.'

Like many award-winning IROs, Ganapathy chalks up much of his company's success to senior management's IR commitment. 'It makes everyone's job a lot easier because we don't have to convince them of the need for transparency and easy access.'

Ganapathy insists that good investor relations has resulted in a higher stock price for Infosys. 'It creates an extremely loyal base of investors who will bide with us and support us in times of need because they have respect for management. I have no doubt in my mind that IR does create a valuation premium, even if you can't put a number on it.'

Click here to see the Award Winners.

Critic's corner
David Webb, Hong Kong's well-respected shareholder activist and founder of the new Hong Kong Association of Minority Shareholders (Hams), was bemused by the idea of presenting IR awards in a region he considers to be still lacking in the essentials of the discipline. Webb takes issue with PCCW winning best IR in a takeover for its acquisition of Hong Kong Telecom, which he attributes to a dearth of recent takeovers. 'Frankly there was a lot of misleading communication during the takeover, so PCCW is not worthy of the award,' he argues. 'Their PR was very aggressive. They tried to portray it as a done deal when it wasn't. They were not as transparent as they should have been.'
He also argues against's award for best IR by a growth market company. 'There are smaller companies on the Growth Enterprise Market with better IR, but they're less visible. It's difficult to get attention when you're just a tadpole in a lake.' Webb notes the disproportionately high number of Singaporean winners. 'This indicates their leadership in IR. It's sad Hong Kong companies were found wanting.'

How the winners won
Investor Relations magazine commissioned an independent survey of the Asian investment community by NIPO and Taylor Nelson Sofres Hong Kong. The researchers interviewed 580 Asian fund managers and buy and sell-side analysts in ten countries across the region. They both voted for companies in the various award categories, and gave their general perspectives on investor relations in Asia. The results of the survey are available in the Asia Research Report 2001. The report costs US$245 for subscribers to Investor Relations magazine, and can be ordered online at Alternatively, call +44 20 7637 3579.