Companies in Malaysia and Thailand lead for disclosure on ASEAN index

01 October 2018 Authored by Consultancy.asia

Publically listed companies in Malaysia and Thailand are leading their ASEAN counterparts when it comes to voluntary disclosure, topping the table ahead of Singapore on FTI Consulting’s ASEAN Disclosure Index for 2018 – with Indonesian, Filipino and Vietnamese companies lagging behind.

Looking beyond the legally mandatory disclosure obligations of publically listed companies operating in the ASEAN-6 – that is, ASEAN’s six largest economies; Thailand, Indonesia, Philippines, Malaysia, Singapore and Vietnam – the FTI Consulting analysis instead considers non-financial voluntary disclosure practices which align with regulations in other markets and investor expectations, such as with benchmarks in the EU.

The FTI study reviewed publically available information from the annual reporting of 180 regionally listed companies, together with an examination of corporate websites, to assess performance in 15 disclosure parameters – broken down into the categories of Performance Disclosure, Board Quality, and Quality of Risk Disclosure – before arriving at a weighted overall aggregate score to compile a final index.

Topping the chart this year were the firms of Malaysia, with a composite score 8.7 out of 10, followed by those in Thailand with a score of 8.6 and a composite 8.3 ranking among the Singaporean companies assessed. At the other end of the chart were Vietnamese companies, dragging the overall ASEAN average (7.8) down with a 5.2 rating, while companies in Indonesia and the Philippines faired in the middle with respective scores of 7.9 and 7.8 out of ten.Company disclosure performance in ASEAN countriesAs a further breakdown, companies in Malaysia received the highest score of assessed nations for board quality – 3.5 compared to a low of 2.5 in Vietnam – yet trailed those of Thailand when it came to risk disclosure, with a score of 4.2 against 4.5 in Thailand. Vietnam meanwhile, managed a composite of just 1.9 for risk disclosure, a category which included risk management related parameters such as whistleblowing mechanisms and sustainability reports.

The five parameters of risk management were all given a 10 percent weighting, indicating a transparent corporate culture, while the five of ‘board quality’, such as third party evaluations, gender diversity policy and targets, and executive remuneration details, received a lesser weighting of 8 percent each. Two further disclosure elements were evaluated together making up the remaining 10 percent; relevant operating metrics, and business strategy and long-term corporate objectives.

“The high disclosure performance of Malaysia and Thailand is commendable – with Malaysian companies clearly driving higher standards of board-related disclosures amongst other jurisdictions, while Thai companies score highest on Risk Disclosure,” the FTI index report stated in summary. Singapore, Malaysia and Thailand score highly on disclosure parameters as compared to Indonesia and Philippines, which are close to one another.”

The outlier of the assessment, companies in Vietnam, came in for a less flattering review – yet this may not entirely be a factor of poor culture; “Vietnam is still a frontier jurisdiction and this also reflects in the scores. One way Vietnam could improve would be to simply make English language versions, in addition to Vietnamese versions, of disclosures available on corporate websites.” While Vietnam was also rated as middling for gender diversity at board level, a broader BCG study previously concluded Vietnam to be a regional leader in this respect.Disclosure performance index by sector in ASEANWhen considered by industry, regardless of country origin, the telecom and tech sector led the way overall with a score of 9.4 out of 10, including a 4.9 out of 5 rating for board quality, followed by Energy/Utilities with an 8.8 – considered by the FTI analysts to be a revelation. Also surprising to the firm was the banking and financial services sector placing in fourth (split by healthcare and pharma) with a rating 7.7 despite its strong international profile. The real estate and construction sector may be a less surprising last place-getter for many.

“The ASEAN Disclosure Index report shows that progress is being made in the region to raise corporate transparency and non-financial disclosure, but there is still room for improvement,” Paul Downie, FTI’s Strategic Communications practice Chairman for the Asia Pacific said. “These are increasingly important issues, bolstered further by the EU non-financial guidelines announced last year, and we are pleased to produce a report that will help improve the financial communications ecosystem in Asia.”

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