TSMC, Newcrest Head Best Corporate Governance List, CLSA Says

Taiwan Semiconductor Manufacturing (2330) Co. and Newcrest Mining Ltd. head up a list of 40 large companies with the best corporate governance in Asia Pacific, according to a study conducted by CLSA Asia-Pacific Markets.

The two highest-ranked Asian markets are Singapore and Hong Kong, according to the study which was done in conjunction with the Asian Corporate Governance Association. The “excessive” influence of billionaire-owners in the region has been a stumbling block to better governance, the report said.

A series of scandals plaguing companies from Japan’s Olympus Corp. (7733) to Hong Kong’s Sun Hung Kai Properties Ltd. (16) erased billions in market value, heightening awareness of corporate governance among investors. Short-sellers have also targeted Chinese companies including Sino-Forest Corp., suggesting that accounts have been manipulated.

“We’re still allowing companies to list that arguably shouldn’t be listed,” Mark Allen, secretary general of the Asian Corporate Governance Association, said today at a press conference in Hong Kong. “We need to have a better IPO process in Hong Kong and Singapore.”

Family control of companies in Asia are a source of conflict of interests, while the “excessive” influence of billionaire owners has hindered regulatory reforms, the report said.

About half of the 864 companies covered in the report are controlled by shareholders whose primary financial interest isn’t in the listed company.

“The risks come when the controlling shareholder has a lot of other interests and might use the listed company to help out the private interest,” Amar Gill, CLSA’s head of Asia research, said at the conference today.

The average profit-to-earnings ratio of markets deemed to have better corporate governance is 14, compared with 12.6 for those with lower scores, according to the report.

Other companies that scored well for corporate governance include Tokyo Gas Co., BHP Billiton Ltd. (BHP), Public Bank Bhd, HSBC Holdings Plc (HSBA) and Standard Chartered Plc (STAN), according to the report.

To contact the reporter on this story: Simon Lee in Hong Kong at slee936@bloomberg.net

To contact the editor responsible for this story: Hwee Ann Tan at hatan@bloomberg.net

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