When a company – a trading empire, no less – downgrades the corporate governance code it follows because it feels it is unsuited to Asia, investors should sit up. Jardines has long ticked few governance boxes yet has been accepted as well-run. But by changing its London listings to the so-called standard category (where governance rules are less stringent than in the premium category), the group is sending the wrong message.
Since it delisted from Hong Kong two decades ago, Jardines has grown impressively while flying under the radar. A Bermudan domicile, barely traded London listings, more active Singapore ones and Hong Kong operations will do that. The main companies – Jardine Matheson, Jardine Strategic, Hongkong Land and Jardine Cycle & Carriage – make up 16 per cent of Singapore’s Straits Times index but produce 1 per cent of blue-chip trading volume.
The low turnover is down to both Jardines’ low profile and its allure for buy-and-hold investors. None of the main six companies have produced a total return of less than 15 per cent a year for the past 10 years. Shareholders have in return accepted a lack of board turnover and a near-total lack of independent directors. Jardines’ argument is that it works well and can be trusted to keep doing so. A company run by a single family for 180 years suggests strong institutional memory. Yet lowering the standards it is required to follow is asking investors to trust that future generations will be just as mindful of minorities.