Fluent Essays

LB 5231: ASSIGNMENT 2 – EDITORIAL ESSAY This assignment involves two opposing editorial views on the approaches to corporate responsibility (i.e. covering ethical, financial, legal and discretionary) by senior management (for instance board members and directors of the company) from two different newspapers: “The Straits Times (Singapore) (ST) and “Economist” (E). You are expected to read two articles (reproduced below), the first a case study of a private company that went bankrupt in Singapore, and the second on corporate governance in Asia. You will use both sources to support your writing of the editorials The Straits Times is a Singapore based English newspaper (available in digital and printed version) and owned by Singapore Press Holdings (SPH) correspondents bring world news helping readers to appreciate world events from a Singaporean perspective. The paper often been mentioned as being as "mostly pro-government” referring to the ruling government or People’s Action Party (PAP). A link is attached http://www.straitstimes.com . The “Singapore Perspective” may be described as “soft authoritarianism” or “state-centred approach to development” which emphasizes society’s welfare rather than individual welfare. Society’s welfare is as defined by government leaders rather than individual thinkers that are independent of government. So business responsibility is often determined by the government’s view on societal welfare, and one distinctive approach in this point of view is that individual welfare is not the guiding principle but only a component of overall societal welfare. The Economist is a UK- based international newspaper and its perspective on corporate responsibility is based on its deep identification with the liberal project which has long proved influential throughout the world. The philosophy of individual liberty connotes both a desire for freedom from state regulation in economic matters (often described as “liberal”) and a demand for the state to insure a minimal degree of social and economic justice. A link is attached https://search-proquest-com.elibrary.jcu.edu.au/publication/366256 Liberalism has been described as “combined economic freedoms—the right to unconditional private property; low taxes; no internal tariffs; external free trade—with political freedoms: the rule of law; civil equality; freedom of the press and assembly; careers ‘open to talent’; and responsible government”. Hence, instead of focusing on when a corporate business is acting responsibly or not, contemporary theories of justice should focus on the ways in which political and social institutions can help businesses be responsible, in both economic and noneconomic ways. Write two editorials (500-word limit for each editorial), one for ST and the other for E that have different perspectives on corporate responsibility. You are expected to write each editorial giving regard to these differences. Within the limited word count, you are required to mount a lucid and convincing argument about the topic from two points of view. Remember these are different points of media view and therefore should have a different expected outcome. Also note, that since there are two different expected outcomes, there are different discussions that lead to that outcome. This is an academic piece, with a different format. Hence in text citations are not required, however (and this is important) you must include a bibliography. A bibliography includes all places where you have found information about the topic, even if you have not included any specific information in your work. Submissions: Please take note of the following: 1) You will get TWO chances to submit your assignment through an Assignment Drop Box. 2) The Submission Deadline will be 1800 hours on 19 September 2020. 3) Please ensure you submit your Assignment a day before deadline to avoid any issues at the 11th hour on account of time differences etc. 4) This Assignment will be marked using a Rubric that is in the Subject Outline. Please study the R ubric in the Subject Outline carefully to understand how you will be assessed. Article 1 Hin Leong Trading directors risk lawsuits over hidden losses Associate professor with the National University of Singapore Business School Mak Yuen Teen said that Hin Leong’s failure to disclose US$800 million in losses is a serious lapse in corporate governance AUTHOR Toh Han Shih DATE May 6, 2020 Some directors of troubled Singaporean firm Hin Leong Trading are facing potential lawsuits over the cover-up of US$800 million (S$1.1 billion) of losses, which is considered a serious lapse in corporate governance. The oil trader’s founder, Lim Oon Kuin (OK Lim), said he had ordered his company’s finance department not to disclose the US$800 million losses incurred from oil futures, according to a filing with Singapore’s High Court. The Commercial Affairs Department (CAD), the white-collar crime unit of Singapore police, is investigating Hin Leong, one of Asia’s largest independent oil traders, according to media reports. Singapore’s Accounting and Corporate Regulatory Authority (ACRA) is monitoring this case and will assess if further action is warranted, an ACRA spokesperson told the Independent. “The payments made by HLT (Hin Leong Trading) to satisfy margin calls made in respect of such losses were reflected as ‘accounts receivables’ and remained recorded as such after the losses were realised,” Lim, who is roughly 75 years old, said in the court document. - Advertisement - Creditors will likely seek legal remedies against directors of a company, if these directors knew or should have known that the company’s financial accounts, for which they are responsible, were fraudulent or false, David Webb, a Hong Kong-based corporate governance activist, told the Independent. Hin Leong has three directors who are also shareholders of the company, according to Singapore corporate records. The three directors are OK Lim, his son Evan Lim Chee Meng and his daughter Lim Huey Ching. OK Lim owns 75 percent of the company which has an issued share capital of S$30 million, while Evan Lim owns 15.4 percent and Lim Huey Ching owns 9.6 percent. On April 17, Hin Leong filed an application in the Singapore High Court for temporary legal protection from creditors. On April 27, the High Court granted the company interim judicial management. Hin Leong owes over US$3 billion to more than 20 banks including HSBC. Three leading Singapore banks – DBS, UOB and OCBC – are owed over US$600 million by Hin Leong, reported Business Times. Other banks which are creditors of Hin Leong include Societe Generale, ABN AMRO and Sumitomo Mitsui Banking Corporation, according to Singapore corporate records. - Advertisement - The court filing cites a collapse in oil prices and the COVID-19 pandemic which severely slashed demand for oil and increased costs for Hin Leong. The pandemic caused US oil future prices to fall below zero for the first time in history on April 20. As far as civil lawsuits are concerned, suspicion of fraud causing financial loss would be grounds for legal action by parties who suffered the financial loss against the fraud suspects, said Webb. “You can’t sue somebody just for bad luck.” “I expect the auditors will have to answer for their apparent failure to detect the hiding of the losses,” Webb added. Hin Leong’s auditor Deloitte & Touche did not reply to the Independent’s questions. A Singapore-based spokeswoman told Reuters, “We stand behind the quality of our work. Our audit was performed with the highest standards of audit and compliance with the information made known to us at the time.” - Advertisement - Since Hin Leong is an exempt private company, auditor requirements are far less strict compared to listed companies, said Mak Yuen Teen, associate professor with the National University of Singapore Business School. Hin Leong’s failure to disclose US$800 million of losses is a serious lapse in corporate governance, said Mak. “The US$800 million is apparently just undisclosed losses from futures trading. But the hole appears much bigger.” According to the court document, the firm’s total liabilities in April were US$4.05 billion while its unaudited total assets were US$714 million, far less than its audited assets totalling US$4.56 billion as of October 31, 2019. In less than six months between last October and April, the company’s assets dropped dramatically by more than 80 percent. “Covid-19 and the drop in oil prices may have contributed but do not explain the US$800m in undisclosed future losses and the allegations of margin calls being recorded as accounts receivables,” Mak added. If Hin Leong is not an exempt private company but a listed company, the lapses would have shown up earlier, Mak pointed out. Being an exempt private company, Hin Leong’s audited accounts are not publicly available. In Hin Leong, there are no checks and balances like a board overseeing management – the board and management are the same and they are the family members, Mak noted. There are no independent board members in Hin Leong, corporate documents show. “To me, one of the major problems here is that even though it is very large with more than US$20 billion in revenues, it could still be considered an exempt private company because it has fewer than 20 shareholders and no corporate shareholders. To me, that is a big gap. The family has the protection of limited liability of a company with very few safeguards. A recipe for disaster,” said Mak. Hin Leong did not reply to questions that were emailed to them. Toh Han Shih is a Singaporean writer in Hong Kong.Follow us on Social Media Article 2 is a PDF (“TRACKING CORPORATE GOVERNANCE IN ASIA”) which is listed in the Assignment 2 folder Writing an Editorial Alan Weintraut Annandale High School Annandale, VA 22312 [email protected] CHARACTERISTICS OF EDITORIAL WRITING An editorial is an article that presents the newspaper's opinion on an issue. It reflects the majority vote of the editorial board, the governing body of the newspaper made up of editors and business managers. It is usually unsigned. Much in the same manner of a lawyer, editorial writers build on an argument and try to persuade readers to think the same way they do. Editorials are meant to influence public opinion, promote critical thinking, and sometimes cause people to take action on an issue. In essence, an editorial is an opinionated news story. Editorials have: 1. Introduction, body and conclusion like other news stories. 2. An objective explanation of the issue, especially complex issues. 3. A timely news angle. 4. Opinions from the opposing viewpoint that refute directly the same issues the writer addresses. 5. The opinions of the writer delivered in a professional manner. Good editorials engage issues, not personalities and refrain from name-calling or other petty tactics of persuasion. 6. Alternative solutions to the problem or issue being criticized. Anyone can gripe about a problem, but a good editorial should take a pro-active approach to making the situation better by using constructive criticism and giving solutions. 7. A solid and concise conclusion that powerfully summarizes the writer's opinion. Give it some punch. Four Types of Editorials Will: 1. Explain or interpret : Editors often use these editorials to explain the way the newspaper covered a sensitive or controversial subject. School newspapers may explain new school rules or a particular student-body effort like a food drive. 2. Criticize: These editorials constructively criticize actions, decisions or situations while providing solutions to the problem identified. Immediate purpose is to get readers to see the problem, not the solution. 3. Persuade: Editorials of persuasion aim to immediately see the solution, not the problem. From the first paragraph, readers will be encouraged to take a specific, positive action. Political endorsements are good examples of editorials of persuasion. 4. Praise: These editorials commend people and organizations for something done well. They are not as common as the other three. Writing an Editorial 1. Pick a significant topic that has a current news angle and would interest readers. 2. Collect information and facts; include objective reporting; do research. 3. State your opinion briefly in the fashion of a thesis statement. 4. Explain the issue objectively as a reporter would and tell why this situation is important. 5. Give opposing viewpoint first with its quotations and facts. 6. Refute (reject) the other side and develop your case using facts, details, figures, quotations. Pick apart the other side's logic. 7. Concede a point of the opposition — they must have some good points you can acknowledge that would make you look rational. 8. Repeat key phrases to reinforce an idea into the reader's minds. 9. Give a realistic solution(s) to the problem that goes beyond common knowledge. Encourage critical thinking and pro-active reaction. 10. Wrap it up in a concluding punch that restates your opening remark (thesis statement). 11. Keep it to 500 words; make every word count; never use "I" A Sample Structure I. Lead with an Objective Explanation of the Issue/Controversy Include the five W's and the H. (Members of Congress, in effort to reduce the budget, are looking to cut funding from public television. Hearings were held …) · Pull in facts and quotations from sources which are relevant. · Additional research may be necessary. II. Present Your Opposition First As the writer you disagree with these viewpoints. Identify the people (specifically who oppose you. (Republicans feel that these cuts are necessary; other cable stations can pick them; only the rich watch public television.) · Use facts and quotations to state objectively their opinions. · Give a strong position of the opposition. You gain nothing in refuting a weak position. III. Directly Refute The Opposition's Beliefs You can begin your article with transition. (Republicans believe public television is a "sandbox for the rich." However, statistics show most people who watch public television make less than $40,000 per year.) · Pull in other facts and quotations from people who support your position. · Concede a valid point of the opposition which will make you appear rational, one who has considered all the options (fiscal times are tough, and we can cut some of the funding for the arts; however, …). IV. Give Other, Original Reasons/Analogies In defense of your position, give reasons from strong to strongest order. (Taking money away from public television is robbing children of their education …) · Use a literary or cultural allusion that lends to your credibility and perceived intelligence (We should render unto Caesar that which belongs to him …) V. Conclude With Some Punch Give solutions to the problem or challenge the reader to be informed. (Congress should look to where real wastes exist — perhaps in defense and entitlements — to find ways to save money. Digging into public television's pocket hurts us all.) · A quotation can be effective, especially if from a respected source. · A rhetorical question can be an effective concluder as well (If the government doesn't defend the interests of children, who will?). Writing an Editorial http://www.geneseo.edu/~bennett/EdWrite.htm Corporate governance practices have improved in Asia since the Asian Financial Crisis although disparity exists across the region. Besides promoting economic growth and financial stability, corporate governance will become even more important over the next decade as investors place greater emphasis on environmental, social and governance issues. History is littered with numerous examples of corporate collapses arising from poor corporate governance practices. Although the corporate governance movement began in the 1970s in the United States, it only attracted a great deal of attention and interest in the aftermath of the corporate and banking scandals in the 1990s and early 2000s. Poor governance impedes economic growth and increases financial market volatility; both the 1998 Asian Financial Crisis (“AFC”) and the 2008 Global Financial Crisis (“GFC”) underscore this fact and the consequences of weak governance. Research shows that during the AFC, countries with the lowest corporate governance were also those which experienced the largest currency depreciation and stock market decline. Following this, policymakers in the region undertook a series of structural reforms to strengthen their economies to deal with future external shocks. Apart from financial and corporate restructuring, many adopted new laws to address corporate bankruptcy and governance. This led to stronger balance sheets in both the public and private sectors which allowed the Asian corporates to fare better during the GFC. 20 YEARS ON FROM AFC --------------- A joint biennial corporate governance watch survey conducted by the Asian Corporate Governance Association and CLSA shows the overall breadth and depth of corporate governance practices have improved across Asia since the AFC. Yet the disparity in ranking across the region is significant; Philippines and Indonesia have to do much more to bridge the gap. The survey also indicates that countries such as Singapore and Hong Kong come out tops due to robust legal, regulatory and economic institutions (see fig.1). Out of all the assessed categories, corporate culture ranked the lowest across the region while accounting and auditing scored the highest due to the acceptance of international accounting and auditing standards by governments and independent audit regulation (see fig.2). TRACKING CORPORATE GOVERNANCE IN ASIA Fig.1: CG watch market scores: 2010 to 2016 Fig.2: Market category scores (CG watch 2016) Business culture is different in Asia compared to the Western nations. Many companies do not engage in open communication with shareholders to avoid unwanted attention. This holds true for the listed companies that are majority family-owned; related party transactions, cross-shareholdings and minority shareholder rights are some of the key areas that will come under scrutiny. (%) 2010 2012 2014 2016 Change 2014 vs 2016 (ppt) Direction of CG reform Australia - - - 78 - - 1. Singapore 67 69 64 67 (+3) Mostly sunny, but storms ahead? 2. Hong Kong 65 66 65 65 - Action, reaction: the cycle of Hong Kong life 3. Japan 57 55 60 63 (+3) Cultural change occurring, but rules still weak 4. Taiwan 55 53 56 60 (+4) The form is in, now need the substance 5. Thailand 55 58 58 58 - Could be on the verge of something great, if... 6. Malaysia 52 55 58 56 (-2) Regulation improving, public governance failing 7. India 49 51 54 55 (+1) Forward movement impeded by vested interests 8. Korea 45 49 49 52 (+3) Forward movement impeded by vested interests 9. China 49 45 45 43 (-2) Falling further behind, but enforcement better 10. Philippines 37 41 40 38 (-2) New policy initiatives, but regulatory ennui 11. Indonesia 40 37 39 36 (-3) Losing momentum after progress of recent years (%) Total CG rules and practices Enforcement Political and regulatory Accounting and auditing CG culture Australia 78 80 68 78 90 74 1. Singapore 67 63 63 67 87 55 2. Hong Kong 65 63 69 69 70 53 3. Japan 63 51 63 69 75 58 4. Taiwan 60 54 54 64 77 50 5. Thailand 58 64 51 45 77 50 6. Malaysia 56 54 54 48 82 42 7. India 55 59 51 56 58 49 8. Korea 52 48 50 53 70 41 9. China 43 38 40 36 67 34 10. Philippines 38 35 19 41 65 33 11. Indonesia 36 35 21 33 58 32 Fig.4: Minimum shareholding requirement to request an EGM INTERESTING OBSERVATIONS --------------- A standard approach to corporate governance is difficult due to varying regulatory, cultural and economic differences between countries. Nonetheless most countries tend to adopt these six OECD Principles of Corporate Governance in their national corporate governance frameworks: 1. Ensuring the basis of an effective corporate governance framework 2. Rights of shareholders 3. Equitable treatment of shareholders 4. Role of stakeholders 5. Disclosure and transparency 6. Responsibilities of the board The implementation mechanism, however, varies across jurisdictions. The framework, for example, can be on a ‘binding’, ‘voluntary’ or ‘comply or explain’ basis. Under the ‘comply or explain’ approach, companies have to comply with the general principles of the corporate governance codes under the stock market listing rules but non-compliance is allowed based on the premise of full disclosure. Fig.3 shows that more countries prefer the principles-based ‘comply or explain’ approach as it is less rigid and allows companies to go beyond the minimum requirements. On the flipside it can be ambiguous and too broad to be an effective guide. The rules-based ‘binding’ approach, on the other hand, provides clarity and standardisation but may not be suitable for all companies. On the issue of rights of shareholders, the OECD surveyed the minimum shareholding requirement for a shareholder to request an extraordinary general meeting (“EGM”); more than half require a minimum 5% shareholding while within Asia the majority stipulated 10% (see fig.4). Fig.3: Corporate governance implementation mechanism Coverage: 45 OECD and non-OECD jurisdictions Coverage: 45 OECD and non-OECD jurisdictions 7% 11% 33% 27% 84% 53% Up to 3% Binding Binding Up to 3%5% Comply or explain Comply or explain 5%10% Others Voluntary 10%More than 10% 20% 17% 9% 9% 31% 4% 50% 55% 9% Taiwan, Hong Kong, Indonesia, Malaysia, Singapore & Thailand China, India, Indonesia, Malaysia, Singapore & Vietnam Thailand China, India, Philippines & Vietnam Taiwan, Korea & Philippines Korea & Philippines Hong Kong Coverage: 11 Asian countries Coverage: 11 Asian countries Fig.6: Directors’ qualification requirements in Asia The equitable treatment of all shareholders is just as important and one way to assess this is to look at related party transaction and the approval process associated with it; 59% of jurisdictions require board approval for certain types of related party transactions. A similar percentage requires shareholder approval as an alternative or complementary feature (see fig.5). Another area that warrants close examination is the board of directors; structure, size, independence and maximum term of office are some of the categories that come under scrutiny. Countries typically have a one-tier board system but more are now choosing to institute a two- tier system that delineates the supervisory and management functions. The size of the board varies with caps on minimum rather than the maximum number of directors. On the independence feature, the survey shows that most prefer to have at least 50% of independent directors. But within Asia, more countries have kept this ratio at 33%. Still on this topic, the qualifications of the directors matter and these are implemented by law or code. Most jurisdictions require the entire board of directors to be qualified. Within Asia, 100% of the countries in the survey require a Fit and Proper clearance while half additionally require minimum education and training as well as professional experience (see fig.6). Interestingly, gender representation data from a Credit Suisse Research Fig.5: Within Asia, more countries require both board and stakeholder approval for related party transactions Shareholding and board approval Fit and proper test China China Taiwan Taiwan Korea Indonesia Singapore Hong Kong Hong Kong Thailand Korea Thailand India India Philippines Vietnam Malaysia Vietnam Vietnam Indonesia Taiwan Malaysia Indonesia Singapore Malaysia Philippines Singapore Philippines Shareholder approval Minimum education and training & professional experience Board approval Fig.7: Women in senior positions in Asia in 2016 showed that Korea lagged the region while Thailand topped in terms of women in senior positions (see fig.7). WHY IT MATTERS? --------------- According to an Ernst & Young survey1, 39% of the investors will rule out an investment immediately if there is a history of poor corporate governance. This number will likely increase as the millennial generation becomes the key driving force for the global economy. Millennials are known to strongly value corporate social responsibility (“CSR”) initiatives. According to the European Commission, CSR is a concept whereby companies integrate social and environmental concerns in their business operations and in their interactions with their stakeholders on a voluntary basis. An increasing number of companies are including CSR initiatives as part of their overall corporate governance practices. This in turn allows them to infuse ethical norms and accountability measures into their business practices. Corporate governance expectations have also increased since the GFC with a number of jurisdictions opting to embrace investor stewardship codes, first implemented by the United Kingdom in 2010. The code which is directed at institutional investors came into being, prompted by questions on whether a more active shareholder involvement in investee companies would have helped prevent or lessen the crisis. Most stewardship codes are voluntary and according to the Ernst and Young report dated 2017 it is still too early to gauge if they have had an impact on improving corporate governance. Nevertheless the adoption of these codes should encourage investor engagement, improve disclosure and transparency and contribute to the long-term success of companies. Going forward, the world will see the growth and impact of millennials as a socio-economic group become meaningful. Individuals born after 1980 will constitute the largest age demographic in the world at more than 2 billion, versus 1.4 billion Gen Xers and 1.2 billion Baby Boomers. By 2020, they will account for around 50% of the global workforce – 75% by 2025 – and they will inherit the largest intergenerational transfer of wealth we have ever seen with more than USD30 trillion of global wealth to be handed down (see Millennials and Artificial Intelligence). Given this generation’s attention to environmental, social and corporate governance (“ESG”), and community engagement in general, investment strategies that integrate ESG principles and/or thematics resonating to millennials should be a major part of the future product offerings (see Mainstreaming ESG investing in Asia). 30 20 10 0 (%) Ko re a Ta iw an In do ne sia Ch in a Si ng ap or e Ph ili pp in es In di a Ho ng K on g Th ai la nd M al ay sia Ko re a In di a In do ne sia Ho ng K on g Ch in a M al ay sia Ta iw an Si ng ap or e Ph ili pp in es Th ai la nd Female representation on boards Female representation on senior management http://www.eastspring.com/perspectives/millennials-and-artificial-intelligence http://www.eastspring.com/perspectives/mainstreaming-esg-investing-in-asia Chicago | Ho Chi Minh City | Hong Kong | Jakarta | Kuala Lumpur | London | Luxembourg | Mumbai | Seoul | Shanghai | Singapore | Taipei | Tokyo Sources: 1Ernst & Young Global Limited – Investors see long-term financial benefits in companies with high ESG ratings, as at 2017. Fig.1 - 2. Asian Corporate Governance Association. Fig.3 - 6. Eastspring Singapore and OECD Survey of Corporate Governance Framework in Asia, as at 2017, and OECD Corporate Governance Factbook, as at 2017. Please note that the data for a number of countries come with individual conditions and requirements. Please note that the summary charts shown may not necessarily have taken into consideration all specific requirements in certain countries. For full details, please refer to [http://www.oecd.org/daf/ca/corporate-governance-factbook.html and https://www.oecd.org/daf/ca/OECD-Survey-Corporate-Governance-Frameworks-Asia.pdf]. Fig.7. Credit Suisse Research, as at 2016. 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