Stewardship for Controlling Shareholders: The Case of Singapore

Abstract

The introduction of the UK Stewardship Code sparked widespread interest in stewardship. Initially designed as a ‘comply-or-explain’ (now ‘apply-or-explain’) form of ‘soft law’ to incentivise institutional shareholders to play an active role in corporate governance, the UK Code has attracted apparent imitators, with stewardship initiatives and codes proliferating around the world. Yet, the UK concept of “stewardship” is arguably only relevant to a handful of developed jurisdictions – such as the US, UK and Australia – where institutional investors control significant (if short of outright majority) voting rights in many listed companies. In the rest of the world (arguably save Japan), it is controlling-block shareholders, who are able to directly monitor management or manage the company themselves, that dominate most listed companies. Employing the concept of “stewardship” as a device to discourage tunneling and other abuses of controlling shareholder power is of presumptive utility to such jurisdictions, given the limitations of existing legal mechanisms for private enforcement such as the derivative action, oppression/unfair prejudice remedy and shareholder fiduciary duties. Drawing on my forthcoming work (with Puchniak), I explain how Singapore has experimented with stewardship codes as to develop a model of “stewardship” that commits state and family controlling shareholders to exercising their shareholder rights to ensure the long-term success of the company. This unique approach to stewardship premised on entrenching controlling shareholders may be critical to Singapore’s reputation as an Asian corporate governance leader, and serve as an alternative to the UK Stewardship Code for other jurisdictions.

Samantha S Tang

Lecturer

My research interests include corporate law, shareholder activism, and ESG investing.