Singapore’s Puzzling Embrace of Shareholder Stewardship: A Successful Secret

NUS Law Working Paper No. 2019/022

NUS Centre for Asian Legal Studies Working Paper 19/07

NUS EW Barker Centre for Law & Business Working Paper 19/04

Vanderbilt Journal of Transnational Law (Forthcoming)

European Corporate Governance Institute - Law Working Paper No. 484/2019

41 Pages Posted: 24 Oct 2019 Last revised: 13 Dec 2019

See all articles by Dan W. Puchniak

Dan W. Puchniak

NUS Law; ECGI

Samantha Tang

National University of Singapore (NUS) - Faculty of Law

Date Written: October 23, 2019

Abstract

In the wake of the 2008 Global Financial Crisis, the UK created the first stewardship code which was designed to transform its rationally passive institutional investors into actively engaged shareholders. In the UK corporate governance context, this idea made sense. Institutional investors collectively own a sizable majority of the shares in most of the UK’s listed companies. In turn, if the UK stewardship code could incentivize them to effectively monitor management – to act as “good shareholder stewards” – the managerial short-termism and excessive risk-taking, which were identified as contributors to the GFC, could be avoided.

The UK’s idea to adopt a stewardship code sparked a global shareholder stewardship movement. Unsurprisingly, Singapore as a corporate governance leader in Asia, adopted a stewardship code. Based on a superficial textual analysis, the Singapore Code appears to be a near carbon-copy of the UK Code. However, this article, which provides the first in-depth comparative analysis of stewardship in Singapore, demonstrates how Singapore has turned the UK model of stewardship on its head. Rather than enhancing the shareholder voice of institutional investors, shareholder stewardship has been used in Singapore as a mechanism for entrenching its successful state-controlled and family-controlled system of corporate governance. This development has been entirely overlooked by prominent international observers and would be beyond the wildest imaginations of the original architects of the UK Code. Viewed through an Anglo-American lens, this use of “stewardship” may suggest that Singapore has engaged in a corporate governance sham. However, we argue the opposite: it appears to be a secret to Singapore’s continued corporate governance success and provides a much-needed Asian (as opposed to Anglo-American) model of good corporate governance for Asia.

Keywords: shareholder stewardship, Singapore corporate governance, comparative corporate law, state owed enterprises, family firms

JEL Classification: G34, K22, L22

Suggested Citation

Puchniak, Dan W. and Tang, Samantha, Singapore’s Puzzling Embrace of Shareholder Stewardship: A Successful Secret (October 23, 2019). NUS Law Working Paper No. 2019/022, NUS Centre for Asian Legal Studies Working Paper 19/07, NUS EW Barker Centre for Law & Business Working Paper 19/04, Vanderbilt Journal of Transnational Law (Forthcoming), European Corporate Governance Institute - Law Working Paper No. 484/2019, Available at SSRN: https://ssrn.com/abstract=3474151 or http://dx.doi.org/10.2139/ssrn.3474151

Dan W. Puchniak (Contact Author)

NUS Law ( email )

469G Bukit Timah Road
Eu Tong Sen Building
Singapore, 259776
Singapore
(65) 6516 3625 (Phone)

HOME PAGE: http://https://law.nus.edu.sg/people/dan-w-puchniak/

ECGI ( email )

c/o the Royal Academies of Belgium
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1000 Brussels
Belgium

HOME PAGE: http://https://ecgi.global/users/dan-puchniak

Samantha Tang

National University of Singapore (NUS) - Faculty of Law ( email )

469G Bukit Timah Road
Eu Tong Sen Building
Singapore, 259776
Singapore

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