Government funds have adopted a policy of reducing their investment in any company involved in insider trading or in subsidiaries of the same group, saying such involvement reflects poorly on corporate governance.
The funds spoke after the latest move by the board of directors of SET-listed CP All Plc, a major retail arm of Charoen Pokphand Plc, which continues to turn a blind eye amid strong demand from the public to punish executives who were found guilty of insider trading.
The board last Friday submitted a filing to the Stock Exchange of Thailand saying the executives acted with imprudence and a limited understanding of Securities and Exchange Commission rules but had "no intention" of violating them.
Korsak: All smiles as board turns blind eye
To ease public pressure, the board has installed a new committee to oversee corporate governance after the insider trading scandal.
Executives at CP All and True Corporation were fined a combined 33.3 million baht for using inside information to purchase shares of Siam Makro Plc ahead of the 7-Eleven operator's announcement that it would buy out the cash-and-carry giant at above-market value.
The executives were CP All executive chairman Korsak Chairasmisak, vice-chairman Piyawat Titasattavorakul and vice-chairman Pittaya Jearavisitkul along with Athueck Asvanund, a True vice-chairman and group counsel.
A senior executive with the Government Pension Fund said the GPF had gradually sold its CP All shares since the scandal broke last December and now had only a small holding.
The GPF has for five years also had a policy of avoiding investment in corporate bonds issued by CP Group companies.
The reason is the "management style" of CP Group, the source said without elaborating.
"We've sold shares gradually, as we want to alleviate the potential impact on retail investors from the rapid fall in share price," the source said.
Another government fund supervisor, the Social Security Office (SSO), said it held less than a 1% share in CP All before the scandal broke and would not buy further shares in the company.
The SSO will put investment in CP Group on hold as it awaits a final agreement among institutional investors.
The GPF will join a meeting of the Association of Investment Management Companies (AIMC) on Feb 18 to discuss action against the CP All board.
Apart from the AIMC, foreign institutional investors and local retail investors have called for action against the wrongdoing executives.
Bandid Nijathaworn, chief executive and president of the Thai Institute of Directors, said: "I'm disappointed with the resolution of the company's board of directors. This indicates that good governance practices in line with principles of good corporate governance remain a challenge, and even leading listed companies cannot be trusted."
He urged all parties to play a greater role in pushing good practices by revising laws and disqualifying those found guilty in such cases from sitting as directors of listed companies.
Listed firms should disclose information related to director malfeasance in their annual reports, Mr Bandid said, adding that directors should protect the interests of investors and other stakeholders.
CPALL shares closed yesterday on the SET at 41 baht, down 1.75 baht, in heavy trade worth 1.08 billion baht.