Despite years of pressure
on companies to do better, corporate transparency
is an underdeveloped art in Asia.
To understand how far the region’s companies
still have to go in improving financial
reporting, consider HSBC Holdings. HSBC is
a top performer in the ACCA/CFO Asia three-country
“Regional Corporate Transparency
Index (CTI),” which we introduce this month.
The company provides copious detail — its full
annual report weighed in at 3 pounds last year.
It boasts laudable disclosure of its corporate
social responsibility (CSR) activities. And the
company — along with Hong Kong’s MTR —
distinguishes itself in investor relations.
But the bank’s score could be higher still.
Hong Kong’s regulators allow companies to
release financials every six months, a leisurely
pace compared with Singapore and Malaysia,
which demand quarterly releases. Hong Kong
even allows companies a luxurious 120 days
after a six-month close to get their information
in front of investors. HSBC does more than Hong
Kong requires, reporting financials in 65 days. But
that’s not quite up to the regional best practice
established by Singapore and Malaysia. Regulators
in those countries hold companies to 60 days or
under, and many companies listed in Singapore and
Kuala Lumpur often report more swiftly.
HSBC’s case is emblematic. The ACCA/CFO Asia CTI offers a
glass half-full — suggesting better
disclosure throughout the region. It also offers
one half-empty, in which even top performers
trail their peers in other regions.
“The current evidence suggests that Asian financial
reporting is lagging behind U.S. and European
standards,” says Penelope Phoon-Cohen, country
head of ACCA Singapore.
Jamie Allen, the head of the Asian
Corporate Governance Association
(ACGA), based in Hong Kong, adds,
“Other markets are able to provide information
on a timelier basis. Why is it so
difficult in Hong Kong?”
How They Made the Cut
The ranking was created for CFO Asia
by the Singapore arm of the Association
of Chartered Certified Accountants
(ACCA), the global accounting body. Its
aim is to examine the transparency of the
top 25 companies by market capitalization
(as of 31 March 2008) that are constituents
of the main indices in Singapore,
Hong Kong, and Malaysia (The Straits
Times Index, The Hang Seng Index, and
the FTSE Bursa Large 30 Index). This
regional version is an expansion of a
Singapore-only version which has run in
Singapore’s Straits Times since 2004. For
a description of methodology see “Understanding the Transparency Scorecard” at the end of this article.
What makes a company excel in this
ranking? Phoon-Cohen says that the best
performers go beyond mere compliance
to provide information that is understandable
and genuinely useful to investors.
The best reports, she says, “usually
reflect a high degree of empathy by the
preparers for the needs of their users.”
This includes information about future
plans, assessments of risk, and good
graphics. Timely delivery and discussion
of financials with investors, creditors,
and analysts are essential.