Strengthening governance beyond compliance

OVER the past decade, Singapore’s corporate governance landscape has evolved through a careful interplay between regulation and market discipline. While regulatory frameworks set the standard, the real drivers of governance maturity are increasingly found in market expectations and boardroom culture.

The “comply or explain” approach was adopted in the Code of Corporate Governance (Code) in 2001, with the principles and practices of good governance defined by the regulator, and companies asked to be transparent in how they comply (or do not comply) with them.

In areas such as board renewal and remuneration disclosures, tighter regulation has proved necessary. In other aspects, such as gender diversity and sustainability, market-driven best practices are gradually moving the needle. Together, these developments provide a useful lens for understanding how Singapore continues to refine its governance standards.

Board renewal

The evolution of board independence in Singapore illustrates this balance.

In the wake of corporate scandals and the global financial crisis, regulators encouraged board renewal. Initial reforms were introduced through what became known as the “nine-year rule” in the Code. However, under the Code’s “comply or explain” approach, many boards simply justified the continued presence of long-serving independent directors.

In 2018, a “two-tier” voting system was introduced, requiring approval of long-serving independent directors by both all shareholders and non-interested shareholders. Yet, progress was gradual. According to the Singapore Directorship Report, the proportion of independent directors serving beyond nine years fell from 37 per cent in 2018 to 24.6 per cent in 2023 – a steady decline, but not a decisive one.

It took the hardcoding of a nine-year limit in the Singapore Exchange (SGX) Listing Rules from 2023 to accelerate real change. By 2025, 96.8 per cent of listed issuers had independent directors with tenures below nine years, and this figure is expected to reach 100 per cent once the transitionary period is over.

The lesson is clear: Where voluntary progress plateaus, measured regulation can provide the necessary nudge to elevate governance standards.

Progress through practice

However, not all change needs to be forced. Certain reforms have been driven through cultural shifts and leadership examples, demonstrating the enduring value of market-led improvement.

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Gender diversity is one such example. Over the past decade, female board representation has risen from 8.3 per cent in 2014 to 18.3 per cent in 2025, across all listed firms.

While hardly groundbreaking, this shift was achieved without mandatory quotas (unlike some other markets), but through advocacy, peer benchmarking and public reporting. Market discipline and social expectations, complemented by professional development and mentoring, were the primary engines driving progress at a sustainable pace.

The jury is still out, however, with regard to sustainability governance. Since 2022, SGX-listed companies have been required to report climate-related information in line with the Task Force on Climate-Related Financial Disclosures.

With currently only about 9 per cent having established dedicated sustainability committees, there is an expectation that the gradual adoption of the standards by the International Sustainability Standards Board from 2025 will likely deepen board-level oversight and capability.

Requirements for the mandatory disclosures of Scope 1 and 2 emissions are geared towards more extensive disclosures and heightened awareness to shape corporate behaviour in the area of sustainability.

These cases highlight that best practices can gain traction when the market perceives value beyond compliance – in terms of reputation, investor trust and long-term competitiveness.

Transparency takes time

Not every area has progressed smoothly. Remuneration transparency, for instance, remains a challenge.

Despite years of encouragement, detailed disclosure of directors’ and CEOs’ pay fell to 27.8 per cent in 2023, down from 37.6 per cent in 2021. It remained, quite stubbornly, the part of the Code of Corporate Governance that was least complied with.

Recognising that voluntary disclosure was insufficient, SGX amended its listing rules to require issuers to publish exact remuneration amounts and breakdowns for each director and CEO for financial years ending on or after Dec 31, 2024. Data from 2025 shows early impact: 67.8 per cent of issuers now comply.

While disclosure remains a sensitive issue, mandatory transparency fosters accountability and reinforces stakeholder trust, ensuring that governance evolves with societal expectations.

Finding the right balance

Singapore’s governance journey has been characterised by a delicate balance between market maturity and regulatory intervention. The regulatory architecture, led by the Monetary Authority of Singapore, has proven adaptive. The ongoing review of the Code is expected to expand its focus to areas such as corporate culture, board effectiveness and risk management in emerging domains, including artificial intelligence.

But future progress will depend less on adding new rules, and more on internalising the spirit of governance.

Regulations set the floor. But board culture and market discipline raise the ceiling. Markets respect not only rules, but reputations.

The next phase of governance must therefore go beyond compliance. The past decade has shown that both regulation and market practice have roles to play: rules to push when progress stalls, and leadership to inspire when conviction takes root.

This dynamic balance is Singapore’s “sandbox for governance”, one that allows for experimentation, feedback and refinement over time.

The writer is a co-lead author of the Singapore Directorship Report 2025 published by the Singapore Institute of Directors.