FTI Consulting, Inc. on Thursday released the ASEAN Disclosure Index 2018 which tracks corporate disclosure practices among 180 publicly listed corporations in the ASEAN, including Singapore, Malaysia, Thailand, Indonesia, the Philippines and Vietnam.
The index reveals that companies in the region scored well overall on corporate disclosure, with an average composite disclosure score of 7.8 of a maximum of 10 and an average board quality score of 3 of a maximum of 4. However, many companies in the region could improve their risk disclosure standards, with an average risk disclosure score of 3.8 of a maximum of 5 for all 180 companies.
FTI Consulting reviewed public information from the annual reports and corporate websites of 180 listed companies in the ASEAN region to create a weighted composite disclosure scoring system with 12 disclosure parameters and applied it to the FTSE ASEAN Stars Index to create its ASEAN Disclosure Index 2018.
The 12 disclosure parameters were divided into three groups: performance disclosure (two parameters), board quality (five parameters) and quality of risk disclosure (five parameters). The parameters were weighted to calculate the composite disclosure score for each company and then aggregated for all 180 companies.
ASEAN Disclosure Index 2018 Highlights:
Twenty-four (13 percent) of the 180 ASEAN companies are classified as corporate disclosure champions, with composite disclosure scores of 10/10. Eleven of these companies are from Malaysia, eight are from Thailand, three are from Singapore and three are from Indonesia. Ten of the 24 companies are from the banking/financial services sector and four are from the telecom/tech sector.
Board Quality Scores:
• Forty-five of the 180 companies (25 percent) do not have any female board members.
• Only 49 (27 percent) of the 180 ASEAN-listed companies provide third-party board evaluations, though most provide self-evaluations.
• Between the six jurisdictions, Malaysian companies have the highest average board quality score of 3.5/4, followed by Singapore and Thailand at 3.2/4, Indonesia at 3/4, the Philippines at 2.9/4 and Vietnam at 2.5/4.
• Aggregated by industry, telecom/tech companies have the highest average board quality score at 3.5/4, followed by banks/financial services and healthcare/pharma companies at 3.2/4, energy/utilities at 3.1/4, and real estate/construction companies and food/consumer goods companies at 2.8/4.
• In terms of gender diversity at the board level (i.e., at least one female director), Malaysian companies scored the highest (29 of 30 companies had at least one female director), followed by Thai companies (24 of 30 companies had at least one female director). Across the Philippines, Vietnam and Singapore, 21of 30 companies in each country have at least one female director on their board. Indonesian companies are the weakest on this disclosure parameter, with only 19 of 30 companies having at least one female director.
Risk Disclosure Scores:
81 (45 percent) of the 180 ASEAN companies do not provide a convenient whistleblowing mechanism (phone number or email) on their website or in their annual report.
66 (37 percent) do not provide analyst transcripts or details of analyst engagements (even if investor presentations are available on the website).
A majority of companies (74 percent) provide sustainability reports with international benchmarks (i.e., Global Reporting Initiative or GRI standards), but the remaining 26 percent (47 companies) do not.
Between the six jurisdictions, Thai companies have the highest average Risk Disclosure score of 4.5/5, followed by Malaysian companies at 4.2/ 5 and Singaporean companies at 4.1/5.
They are followed by companies in Indonesia and the Philippines at 3.9/5 and Vietnam at 1.9/5.
Aggregated by sector, telecom/tech companies have the highest average risk disclosure score of 4.9/5, followed by energy/utilities at 4.6/5, and healthcare/pharma at 4.3/5. The banking/financial services and manufacturing/industrial sectors have average risk disclosure scores of 3.5/5 and 3.4/5, respectively.
“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,” said Paul Downie, Chairman of Asia Pacific for the Strategic Communications segment at FTI Consulting. “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.”
Commenting on the ASEAN Disclosure Index 2018, Amrit Singh Deo, managing director in the strategic communications segment at FTI Consulting and author of the report, said, “Despite seemingly high aggregate composite disclosure scores in the region, there are significant differences on individual parameters between companies and jurisdictions.
Directors and management teams should discuss higher standards of risk disclosure at board meetings, as global investors view high risk disclosure standards as an opportunity to earn a ‘transparency premium’.”