02 February 2015
to 2008, Asia held a reputation as the Wild East in terms of
corporate-governance and the way companies monitored their operations.
But the world has changed entirely since the global financial crisis,
and forward-thinking companies in the region must now emphasize internal
supervision and transparency.
The trend has filtered through to
the real-estate industry, where service providers are required to prove
their mettle in many ways with back- and middle-office oversight, and
must also protect their clients from any potential pitfalls in
negotiating tenancies, property purchases and tenders for business.
and corporate governance now is vital," Jeremy Sheldon, head of
Integrated Portfolio Services at JLL Asia Pacific, says. "Every single
thing we get involved in has to be compliant. It's the new watchword."
has certainly become more complex as a result of enhanced regulation.
Companies that had five lawyers before the financial crisis now have a
legal staff of 20. The paperwork surrounding deals is at least 25 per
An appropriate level of Corporate Governance is
vital in providing confidence but "this governance is to most
organizations a cost to the bottom line, and not a revenue producer,"
If companies fail to set in place the necessary
checks, they risk losing business when partners and customers demand an
explanation of how they are monitoring compliance issues. "It could be
argued that excessive governance will affect a company's ability to be
competitive but the key is balance." Sheldon adds
Business best practice
recently visited a large telecommunications company in southern China
to brief them on how to set up an appropriate model for outsourcing
parts of their business. The consultation involves instructing
executives on what processes they need to adopt in setting up an
outsourced contract and office, how they need to protect themselves, and
how to make sure that bidding on items such as real-estate contracts is
handled appropriately and competitively.
The issue is perhaps of
most importance to the finance industry, which has come under heavy
scrutiny in the wake of the global financial crisis. "You have had six
or seven years of bank bashing being enforced on everybody," Sheldon
says. Each of those institutions that survived is now intent on making
sure it is going to be "one of the best-run banks in the world."
Asia's competitive advantage
terms of Asian nations, Singapore sets a high corporate governance
standard, according to a study instigated by the Singapore chapter of
the Association of Chartered Certified Accountants and conducted in
conjunction with KPMG. The Lion City ranks third globally in the report,
which was released last November, behind the United Kingdom and the
The researchers pointed to improvements in
Singapore's corporate-governance code and to the listing rules for the
Singapore Exchange as reasons for the high ranking, with the city having
enhanced disclosure, audit committees and risk governance. But
Singapore still has plenty of work to do when it comes to the diversity
of corporate boards, which tend to be dominated by a small circle of
executives with similar profiles, as well as the way boards are
evaluated and social responsibility is reported.
nations generally fared well in the study, while developing countries
ranked poorly, as you might expect. Laos, Brunei and Myanmar were at the
bottom of the ranking.
But there were some surprises. India and
Russia performed strongly, something Irving Low, the head of risk
consulting at KPMG in Singapore, attributed to recent revisions to their
Japan (21st) and Canada (18th)
scored unexpectedly poorly, something Low said may stem from confusing
governance requirements that make it hard, particularly for outsiders,
to "easily understand what is required and when, where and how these
requirements interact with one another."
Asian companies have an
advantage in operating around the Asia Pacific region because they
understand how business is done in this part of the world, Sheldon says.
At the same time, they are eager to adopt best practices from the West.
That combination gives them a competitive edge.
are going to be the behemoths of the future," Sheldon says. If they
combine strong corporate governance with the lower cost base and an
Asian business model, they will be competitive on a global scale.