Better disclosure is only half the equation – shareholders must now play their part

Singapore Exchange Regulation (SGX RegCo) recently amended its listing rules, marking a significant shift towards a more disclosure-oriented and market-driven regime. As of January 1, 2027, listed companies will face stricter requirements regarding executive remuneration, dividend policies, and investor relations. Additionally, they must provide better information regarding their long-term value creation efforts.

While these changes are encouraging, their effectiveness ultimately hinges on two key factors: companies' adherence to the rules, both in terms of form and substance, and shareholders' active engagement with the enhanced disclosures.

Companies must not only comply with the new rules but also effectively utilize the additional information provided. Compliance should not merely be a routine exercise, as companies can produce a plethora of information without genuinely communicating valuable insights to shareholders. Investor relations policies may consist of generic language, remuneration disclosures might contain impressive metrics without explaining their significance, and dividend policies could be overly broad, allowing for justifications for virtually any decision.

To attain true disclosure, companies should provide shareholders with a clear understanding of what management is being rewarded for, the rationale behind selected key performance indicators, the demand for specific targets, and whether incentives promote sustainable, long-term value creation rather than short-term earnings or share-price manipulation.

Similarly, the requirement to maintain and explain dividend policies encourages boards to articulate their thinking behind capital allocation decisions. Shareholders must recognize that dividends represent only one aspect of capital allocation and that boards must weigh various factors, such as paying dividends, reinvesting in existing businesses, making acquisitions, reducing debt, buying back shares, or retaining cash for future opportunities.

Perhaps the most substantial changes involve investor relations. Companies must now maintain an investor relations policy aimed at fostering regular, effective, and fair communication with shareholders, describe their engagement activities in annual reports, and maintain a website for shareholder interaction. SGX's guidance extends further, anticipating companies to provide contact persons, expected response times for shareholder inquiries, access to investor materials, and calendars of upcoming shareholder engagement events.

The new framework should shift shareholder engagement from an annual, one-way communication model to a more continuous dialogue, fostering trust between companies and their shareholders.

However, it is essential to acknowledge that companies can provide the door, but shareholders must be proactive in engaging with the available information. Investors have long advocated for greater transparency, improved corporate governance, and more meaningful engagement from boards. With the regulatory framework moving in this direction, shareholders must seize the initiative by reading enhanced disclosures, evaluating remuneration structures, questioning capital allocation decisions, and engaging with companies in a constructive manner.