Transparency, Ongoing Disclosure Crucial for Stakeholder and Investor Confidence

Transparency and disclosure practices are crucial for businesses seeking to build trust with stakeholders, attract investors and ensure accurate media reporting, experts in a corporate governance forum have said.

The International Finance Corporation (IFC), a member of the World Bank Group, and the Securities and Exchange Commission of Myanmar (SECM) organised a forum at the Yangon Stock Exchange on June 21 to help listed firms raise transparency and disclosure standards in company reporting. The event “Enhancing corporate transparency: trends and business case on transparent reporting and ongoing disclosure” was held in partnership with the Australian Department of Foreign Affairs and Trade, and the UK Department for International Development.

At the forum, speakers from the IFC, the SECM, and the Myanmar Centre for Responsible Business (MCRB) shared their views on how Myanmar companies can benefit from improving disclosure practices and explained the growing trends of reporting requirements in the country.

The press release from the IFC added that regulators, stock exchanges, and investors internationally have been urging companies to disclose both financial and non-financial information in a timely manner to enable investors to better assess investment risks and make more-informed decisions.

“Studies on emerging markets found that better governance is associated with higher valuations of firms. Investors find companies with fuller disclosure more trustworthy and less risky for them to invest in, thus lowering the cost of capital that then translates into higher valuations.

“… greater transparency can bolster investor confidence and improve companies’ access to capital,” the press release added.

Robbie Barkell, private sector development adviser at the Department of International Development of the UK government, said in his opening remarks that good corporate governance is important for both the private sector and the country’s economy.

“Why does corporate governance matter? Corporate governance is not just good for individual businesses, but the economy as a whole.

“A vibrant private sector is important for jobs and reducing poverty … It’s the businesses which create jobs.

“Transparency is a crucial part of corporate governance,” he said.

SECM commission member U Htay Chun, one of the speakers, told The Myanmar Times that companies benefit from a better understanding of best practices to raise their management and disclosure of corporate information.

“Under the corporate governance framework, disclosure and transparency is one of the important principles. A wide range of investors is trading shares in the securities market operated by stock exchange.

“As such, it is necessary to build public confidence in the fairness and soundness of the securities market by establishing a system where issuer information [corporate information] is provided to the public in a timely and fair manner for them to make well-informed investment decisions,” he said.

He added that disclosure of corporate information consists of two different categories – statutory disclosure and timely disclosure. The former is the disclosure of documents required by law, while the latter refers to disclosure of corporate information by listed companies to investors in a timely manner in accordance with regulations stock exchange regulations.

“… listed companies and companies to list need to fully understand the importance of statutory disclosure and timely disclosure and appropriately develop systems for management and disclosure of corporate information.

“By understanding of best practices to raise their transparency and disclosure standards, it will be very supportive to the listed companies and those planning to list for building confidence,” he said.

Ongoing and online disclosure

Vicky Bowman, director of MCRB and one of the speakers, said during the forum that ongoing disclosure is important to both accurate media reporting and gaining the trust of investors and stakeholders. She also highlighted the importance of the internet – a company website.

“No company without a website would have the trust of investors.

“There is a real problem of societal trust on big businesses.

“Internet is becoming a key tool of disclosure … Just having a FB page is not enough,” she explained.

She added that businesses which complained about “rubbish media reporting” should ask themselves: “Do you [your company] have any information about the project on your website?”

The key, according to the MCRB director, is to disclose information accurately and keeping it up to date. To have accurate media reporting, companies need to have updated and accessible information on their website. The language of information depends on the main stakeholders the companies want to communicate with.

“Certainly we don’t think information should only be available in English for a company operating in Myanmar, whether foreign or local.

“But at the same time, companies will have stakeholders such as potential business partners who won’t be able to access it in the Myanmar language,” she continued.

She cited the example of Myanmar Thilawa SEZ Holdings Public Limited’s disclosure document for listing dated May 6, 2016 as an inadequate disclosure.

“The Prospectus for Myanmar Thilawa SEZ Holdings Public Limited didn’t specifically mention risks to the company associated with the legacy of land acquisition and resettlement even though this is an issue of stakeholder concern, including investor concern, i.e. investors seeking to build in the zone,” she told The Myanmar Times.

Ms Bowman said during the panel discussion that media engagement should go beyond promoting pictures of philanthropic activities. Instead of merely taking photos of company executives donating supplies to schools, press officers should engage with key stakeholders in a professional and constructive manner.

She further told The Myanmar Times that annual reports should not be the only communication channel with the media and companies should take an active approach to respond efficiently to criticism.

“The documents [annual reports] tend to be user-unfriendly large files and not picked up by the media as they do not feel fresh. A good up-to-date website is the best tool a company can give for informing stakeholders about its business.

“Beyond that, companies need to work out the best ways to have continuous two-way communications with stakeholders, both proactive and reactive throughout the year, whether communities, NGOs, media or others, and above all to respond promptly and accurately to criticism and challenge.

“Part of this is can be achieved through a grievance mechanism available to key stakeholders they impact. Part of it is through responsive press officers,” she said.

Updating regulations and enhancing institutions

MCRB’s presentation also covered recent and forthcoming regulations related to reporting requirements on businesses operating in the country. These include the new rules for published project summaries, and annual reports about investments under Article 196 of the Myanmar Investment Rules, for companies which are in receipt of a permit or tax incentive from the Myanmar Investment Commission; the forthcoming updated Companies Act which requires a director’s report, and the Environmental Impact Assessment (EIA) process which requires disclosure and consultation at numerous stages.

The forum, organised by Myanmar Corporate Governance Initiative, is part of the IFC and SECM’s collaboration to strengthen corporate governance regulatory standards and practices in Myanmar.

According to the press release, the Myanmar government is keen to further develop the Yangon Stock Exchange and boost the capacity of local companies to raise capital. It is working on the legislative framework to improve risk governance in companies and strengthen shareholder protection.

Vikram Kumar, IFC country manager, added that Myanmar companies need to work hard on raising their corporate governance and disclosure standards in order to attract foreign capital and ensure sustainable development of the country’s capital market.

When asked about the SECM’s involvement in transparency and disclosure practice, U Htay Chun told The Myanmar Times that the Commission would take part in programs on capacity building, awareness-raising and regulatory improvement.

“Memorandum of understanding [MoU] concerning Technical Assistance on Corporate Governance Standards and Practices of the Capital Market in Myanmar has been signed between the SECM and the IFC on March 17, 2017,” he said, adding that the “SECM and IFC Corporate Governance Program Plan” is under preparation in accordance to the MoU.

Other speakers are Daw Tin May Oo, SECM commission member, and Luis Mariano Enriquez-Mejia, senior corporate governance officer at the IFC.

 

Source: The Myanmar Times

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