Stuck: Why Poor Returns Stay Poor

Of 394 SGX companies earning below their cost of equity, 337 were still there 18 months later. Neither the listing rules nor the Code asks what that equity costs.

At the Singapore Institute of Directors' conference on August 28, two of the most senior figures in Singapore corporate life made the same point.

Keppel non-executive chairman Piyush Gupta said the board is an agent of the shareholder, and its job is to steward the company for creating shareholder value. Boards, he said, need to be responsible for strategy, direction and creating value, and cannot just be policemen. Temasek chief executive Dilhan Pillay described boards as catalysts for company-led value creation.

Nine months earlier, MAS Deputy Chairman Chee Hong Tat told the SID Chairpersons Guild that the Corporate Governance Advisory Committee is preparing guidance for boards. It will take them beyond general oversight into value creation and risk management, because these are what investors use to make decisions.

The direction is settled. This article measures how far there is to travel.

The market is already paying for returns

Singapore's market has had a good run, and the reward has not been spread evenly.

Over the 52 weeks to 30 June 2026, the 155 companies earning a return on equity of 8% or more (net profit as a percentage of shareholders' equity) saw their share prices rise by a median of 40.4%. The 181 that were profitable but earned less than 8%, approximately what equity capital costs a Singapore-listed company, rose by a median of 15.7%. Among the 202 loss-making companies, the median price change was zero.

Capital went to returns. On that measure the MAS reform effort is working.

The difficulty is elsewhere. Meeting every listing requirement and reporting a profit each year does not mean a company is earning back what its equity costs. An earlier article in this series counted how many Singapore-listed companies are in that position. This one asks a different question. Over 18 months, how many of them improved their returns, and what did they do differently?

On the surface, almost nothing moved

Chart 1 shows the split by return on equity at both dates, across the 538 companies listed on the Singapore Exchange in both January 2025 and June 2026 with returns data, and separately for the Straits Times Index (STI) and the iEdge Singapore Next 50 (NTR).

The number earning above 8% rose from 144 to 155, which reads as progress. However, the movement underneath tells a different story (see Table 2).

Companies losing money mostly stayed there. Of the 203 in that position in January 2025, 146 were still losing money 18 months later. Fourteen reached 8%.

The middle group barely moved either. Among the 191 that were profitable but earning under 8%, 113 were in exactly the same position at the end, 43 rose above 8%, and 35 fell into losses. Going backwards was almost as likely as going forwards.

Nor was the top group safe. Of the 144 earning 8% or more, 98 held on and 46 (32%) fell below, close to a third of them.

Taking the two lower groups together, 394 companies earned less than 8% in January 2025. 18 months later, 337 of them, or 85.5%, still did. That is a short period over which to judge a company, and some of the 337 may yet cross the threshold. But these were not companies trying and falling just short. The typical company that stayed below 8% ended the period with revenue 2.0% lower than when it began.

The blue chips are not where the improvement is

19 of the 30 STI constituents earned less than 8% on equity in January 2025, and 18 still did in June 2026. Only 4 of the 19 crossed the threshold, and 3 companies that had been above it dropped below. The median STI company earned 7.16%, still short of its cost of equity, in a period when the index itself reached record highs.

The improvement is happening one tier down. Among the iEdge Singapore Next 50 stocks, 26 constituents earned less than 8% in January 2025. Seven of the 26 crossed the threshold, against 4 of 19 in the STI. The number earning 8% or more rose from 18 to 24. Their median return of 8.73% is above the STI blue chips at 7.16%.

The rest of the market moved least. 349 companies earned less than 8% in January 2025 and 345 still did in June 2026. Only 46 of the 349 crossed the threshold and the median company earned 2.35%.

What the 57 did differently

57 companies below the threshold in January 2025 rose above it by June 2026. They have one thing in common.

Of the 57 companies that rose above 8%, 41, or 72%, increased revenue and margin together, against 91 of the 327 that stayed below, or 28%. And both moved by a lot: across the 57, revenue grew by a median of 17.5% and margin improved by a median of 5.68 percentage points. Neither is a modest adjustment.

Of the 394 companies below the threshold in January 2025, 384 have revenue and margin figures at both dates. Sorting those 384 by what they did produces the clearest result in this study. Companies that rose did begin slightly closer to the threshold, so part of the difference reflects where they started.

Growth on its own did not lift returns. Of the 61 companies that grew revenue while margins fell, 4 crossed the threshold, against 2 of the 113 that improved neither.

Margin repair on its own worked better than revenue growth on its own, 12.8% against 6.6%, and it worked even when revenue fell. But neither route on its own came close to doing both, which crossed at 31.1%.

Why it is so hard to get out

The market's signal could hardly have been clearer. Companies earning above their cost of equity gained 40.4% in a year, and loss-makers gained nothing. Yet 337 of the 394 companies below the threshold ended the period exactly where they began. The reward for crossing was visible to every board in Singapore, and it moved almost nobody.

Three reasons, and they compound one another.

1. It is genuinely difficult. Seeing the reward is not the same as being able to reach it. Reaching 8% from below requires both revenue and margin to move, and to move by a lot. Even among the 132 companies that moved both revenue and margin, only 41 succeeded.

2. Returns are not what boards set out to achieve. The Singapore Report on Remuneration Practices, published in March 2026 by the Centre for Investor Protection at NUS Business School, examined 469 SGX-listed companies. Of those, 284 disclosed nothing at all about the performance measures behind executive bonuses. Only 112 disclosed specific measures, citing 634 between them. Leadership and human capital measures were cited most often at 198. Profitability and earnings measures followed at 119, and revenue at 54. Measures of return on capital, meaning return on equity, return on invested capital and total shareholder return, were cited 35 times. The report notes that profitability measures do not directly take into account the level of investment, while return measures have stronger links to value creation. Not one company disclosed the weighting it gave to any measure.

SGX RegCo reached a similar conclusion when it launched its consultation on disclosure requirements in April 2026, noting that around two-thirds of the largest issuers on the Mainboard and Catalist do not disclose the metrics used to measure how remuneration is linked to value creation.

3. What boards do set can be met without returns moving. A revenue target can be met by selling more at the same margin. Profit rises, and the board sees the target met. But growth usually requires more capital, and when the capital base grows alongside the profit, the return on it does not move. Shareholders end the year earning what they earned at the start.

What boards can do

The remedy is not complicated. It is uncomfortable, which is a different problem.

Four questions belong in the board papers of any company earning below its cost of equity.

1. What has the company earned on equity in each of the last three years, and what does management believe that equity costs? One year moves with a disposal or a write-down. Three years show direction. Many Singapore boards have never been given the second number at all, and nothing else here can be done until they have it.

2. What return is the chief executive being paid to deliver? In most companies that disclose their measures, no return figure appears among them. Profit is there. Revenue is there. The return on the capital used to produce them is not. It should be the target, with revenue and margin targets set beneath it, because a company that moves only one of the two crosses the threshold in 6.6% or 12.8% of cases. A company that moves both crosses in 31.1%.

3. What is the plan, and in which year does the return cross the cost of equity? A plan that answers this names the parts of the business that will carry the revenue growth, where the margin improvement comes from, and what it costs. Three to five years. Without it, the target is an aspiration.

4. When will the board know whether it worked, and what happens if it has not? Publishing the answer fixes the date on which both board and management will be judged. It also lets investors tell a company that is executing a plan from one that is not.

What the rules require and what the market rewards

None of the four questions appears in the listing rules or in the Code of Corporate Governance. The Code asks a board to work with management for the long-term success of the company, and its first provision asks directors to hold management accountable for performance. It does not say what performance means, or against what standard it should be measured. Neither does the Listing Manual. That is worth understanding rather than complaining about.

The rules and the Code are built on legal and audit foundations. They ask whether a company is properly governed, properly disclosed and properly controlled, and on the whole they get answers. Nothing in either asks what a company's equity costs, or whether the company is earning it. A board can comply in full and still preside over 18 months of returns below the cost of equity, which is precisely what most of these boards have just done.

Compliance and investability are different disciplines. The first asks whether the company is being run properly. The second asks whether the capital inside it is being put to work. A director fluent only in the first will sign every certificate, clear every checklist, and never see the second coming.

That gap is what the four questions are for. It is also where the market has been paying.

What happens when a board asks

Any board that asks these questions gets one of two answers. Either management can set out how the company will earn its cost of equity, or it cannot.

The second answer is why the questions are resisted. A board that has asked and received no credible answer can no longer approve another year of the same. Its choices narrow to four: change the plan, change the management, sell the business to someone who can earn more from the assets, or return the capital and let shareholders earn their return elsewhere. On the evidence here, a board that still cannot answer the fourth question after three years is no longer running a business. It is warehousing one.

Where the family owns the company

All of this assumes a board that can act independently of management. In Singapore that assumption often fails. The Centre for Investor Protection report finds that 70.8% of SGX-listed companies have at least one executive director who is a substantial shareholder or related to one. Where the family controls both the board and the business, changing the management or selling the company is not on the table.

For these companies the argument is different, and it is stronger. A family whose wealth sits in the equity of one company has more at stake in the return on that equity than any outside investor. The median profitable company earning below the threshold returned 3.61% on equity in June 2026. Against a cost of equity of 8%, that company loses 4.39% of its shareholders' equity every year, and the controlling family bears that loss in proportion to its stake, which is usually the largest single holding in the company.

The usual objection is that families take their return through pay rather than through the share price. The same report puts a figure on it. Companies with executive directors who are substantial shareholders pay median remuneration equal to 1.50% of market capitalisation a year, against 0.60% for companies without. The median company in this group trades at 0.67 times book, so 1.50% of market capitalisation is about 1% of shareholders' equity.

That pay is deducted before the 3.61% return is calculated. Put all of it back, without even allowing for the tax that would then be due, and the median company in this group earns 4.6% on equity. The cost of that equity is 8%. Removing the pay entirely does not close the gap, and it does not come close. Whatever is happening in these companies, pay is not what is holding returns below the cost of equity.

These companies are held below the threshold by the same three things as everyone else, and the same four questions apply. For a family that cannot sell and will not replace itself, they are the only remedy available.

The price of asking

A listing is not a status. It is a claim on other people's money, and it carries an obligation to earn more on that money than the owners could earn elsewhere. Most of the 337 companies below the threshold will still be making that claim in three years' time. Whether they should is a question only their boards can answer, and only if they have asked the four above. Once a board has asked, it can no longer claim not to know.

On 6 January 2025, 394 of the 538 companies examined here earned less than the cost of their equity. By 30 June 2026, 337 still did. Over the same period the companies that did earn their cost of equity rose 40.4% in price. The loss-makers did not rise at all.

Investors have already decided what those two groups are worth. Whether a company is still in the second group in three years' time turns on four questions, and on whether its board is willing to hear the answers.

Written on 30 August 2026 by Lee Ooi Keong.

Lee Ooi Keong is an Independent Director of an SGX Mainboard-listed company with over 30 years of experience in corporate performance, investments and risk management. He is the founder and Managing Director of Clover Point Consultants, an independent Board and C-suite advisory firm, and was formerly Director of Risk Management at Temasek for over 16 years