SINGAPORE will assess if it should introduce a new provision in its corporate governance code to promote good company culture, Monetary Authority of Singapore (MAS) managing director Ravi Menon said.

He was speaking at the annual Corporate Governance Week conference, organised by the Securities Investors Association (Singapore), or Sias, on Monday (Nov 6).

Menon noted that the Hong Kong Stock Exchange introduced a new provision on corporate culture, following its review of corporate governance in 2021.

The provision states that the board should establish the issuer’s purpose, values and strategy, and satisfy itself that these are aligned with the issuer’s culture. All directors must act with integrity, lead by example and promote the desired culture.

“MAS will work with the Singapore Exchange and CGAC to assess if there is merit in introducing a similar provision,” said Menon, referring to the Corporate Governance Advisory Committee, an industry body.

Industry watchers whom The Business Times spoke to welcomed the move. 

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The role of the board in instilling an ethical corporate culture is currently in the introduction to the 2018 code and in the practice guidance, said Professor Mak Yuen Teen of the National University of Singapore’s (NUS) business school. 

Including a provision on corporate culture and subjecting it to the “comply or explain” regime is a good idea, he reckoned. 

“I would say that poor corporate culture is probably the number one contributor to corporate governance scandals. In a number of codes, especially in the UK, there is a significant emphasis on corporate culture,” he said.

Sunil Puri, head of research and engagement at the Stewardship Asia Centre, noted that culture is underplayed as a “soft” issue in corporate governance. 

“It is a very progressive move to make boards accountable to integrate culture… Hopefully, in the longer run, culture will emerge from being a ‘soft’ issue to one of the anchor themes of good governance,” he said.

Prof Lawrence Loh, director of the Centre for Governance and Sustainability at NUS’ business school, likewise reckoned that the provision would set the right tone for companies and widen their disclosures to “governance issues that are at a higher plane”. 

He noted that the challenge is to delineate the scope of “culture” in creating a common framework across diverse companies. Purpose, values and strategic alignment could be some universal aspects.

This sentiment was echoed by Tea Wei Li, partner for enterprise risk services at KPMG Singapore. While culture is difficult to measure, there are other metrics such as achieving zero fraud incidents, she noted.

Christopher Wong, Singapore head of assurance at EY, said that the move would remind companies that “the right value system and culture is integral to guiding organisational behaviour”.

That said, there is some scepticism. Prof Mak worries that adding the culture provision may also just turn into “another box-ticking exercise”. If the wrong people are in positions of power – such as major shareholders, chairmen and chief executives – companies are not going to have a good culture. “In many companies, I think board renewal is necessary to drive change in corporate culture,” he added.

Right culture from within

At Monday’s event, Menon reiterated the need for companies to build the right culture from within, by having a safe whistle-blowing environment and human resources practices that promote ethical conduct.

Boards can also do more to build trust, especially in assessing their own performance.

“Introspection on performance has been an area of missed opportunity for most listed companies here. The board evaluation process is a critical area for boards to do better in and gain the trust of their stakeholders,” he said.

Menon cited a 2022 KPMG survey commissioned by CGAC, which found that half of listed companies are still providing boilerplate disclosures and not willing to disclose any objective performance criteria.

The contributions of board members are often limited to their rate of attendance in meetings, Menon noted. Boards often do not address the outcome of any assessments and the action taken on identified gaps.

He highlighted diversity in skills and expertise among directors as another area for improvement.

“Boards need to look beyond the more traditional areas of expertise such as accounting and legal expertise and consider bringing in experts in emerging areas like technology and sustainability,” he said, suggesting that they tap board matching services by the Singapore Institute of Directors.

After his speech, Sias presented Menon with an award for efforts to support retail investors during his tenure. This is ahead of his retirement from the position on Dec 31. 

“Menon has been a vocal advocate for retail investors. He has called on the financial industry to do more to help retail investors make informed investment decisions,” said Sias president and chief executive David Gerald.

Under Menon’s leadership, MAS made significant efforts to promote financial literacy and investor education among retail investors, he added. This includes establishing the MoneySense Council, which promotes financial education, as well as the SGFinDex financial planning tool.