CGAC: did MAS cast net wide enough?

SINGAPORE this week launched its first permanent, industry-led body, whose purpose is to ensure that the nation's corporate governance (CG) standards remain on a par with the best in the world. The 18-member strong unit boasts some impressive names; yet, rumblings can be already be heard in some quarters that the establishment could have cast its net farther and wider in its search for candidates.

The Monetary Authority of Singapore (MAS) on Tuesday launched the Corporate Governance Advisory Committee (CGAC), the formation of which was a recommendation by the Corporate Governance Council (CG Council) that reviewed the Code of Corporate Governance (CG Code) last year.

The CGAC has been set up as an advocacy, and not a regulatory, body; among its tasks are identifying current and potential risks to the quality of CG in Singapore, taking a leading role in advocating good CG practices, acting as a CG resource and advisory body to regulators, monitoring international trends, and recommending updates to the CG Code.

MAS has staffed the committee with individuals "with diverse and extensive experience in CG matters (including) directors on the boards of listed entities and members from key stakeholder groups such as large and small companies, institutional and retail investors, audit and legal professionals, academia and the media".

Not everyone has been complimentary of its final selection - but just how valid are some of these concerns?

First off, one of the more immediate reactions to the unveiling of the CGAC has been mild disappointment that its composition feels like the "same old, same old" - made up of a number of familiar names that have appeared on a number of committees in Singapore.

Stefanie Yuen Thio, joint managing partner of TSMP Law Corporation, who served on the CG Council, put it this way: "The inaugural CGAC is clearly made up of industry folks with a wealth of experience. Notably, trusted henchmen of Singapore Inc are not in short supply."

I agree with that sentiment, to an extent.

In an earlier piece (BT, Aug 8, 2018, "MAS must set right tone in CG committee set-up"), I'd said it would be refreshing to not always have the same names and faces typically appointed to such bodies, to search further afield for more compelling candidates.

Companies are constantly being urged to do the same with their appointment of directors, and it would be admirable for the CGAC to lead by example, I'd said then.

And, on balance, I feel MAS has made a sincere effort to look for individuals beyond the typical "Who's Who" of Singapore and the CG arena. There are some of the usual suspects but, to be fair, a number of these were likely chosen because they either represent certain stakeholder groups here -- such as, retail and institutional investors - or are so well-versed in CG matters that it would be foolhardy not to have their participation.

There are also some inspired choices - with Prudence Bennett being an obvious example. CG advocate Mak Yuen Teen said he found it "refreshing that we have added someone from outside of Singapore with significant experience in corporate governance in the region at the biggest asset manager in the world".

I would add that it also shows that MAS is not afraid to have a markedly bold and non-establishment voice on the team - sending a clear signal that it will not shy away from criticism even of its own regime.

What I would have liked, however, was for that thought to have been carried just a little further. Ms Bennett is, at this stage, the lone example of the nonconformist choice, and I feel the CGAC would benefit from one or two more of her ilk - which could come from either within or without Singapore.

Well-respected figure

MAS did also score on its appointment of chairman in Bobby Chin - setting the right tone at the top for the CGAC. The former accountant is a well-respected corporate figure, and his standing no doubt helped MAS to draw a fair bit of talent to the committee. His experience and reputation - Mr Chin successfully spearheaded the MediShield Life Review Committee and the Committee to Develop the Accountancy Sector, among others - would also give much credence to the work of the CGAC and improve the level of buy-in from corporates.

Wanting to improve the level of buy-in from corporates is also, I suspect, the reason why MAS staffed the CGAC with what some have called a disproportionately large number of board directors. Nine out of the 18 members, not including the chairman of the Singapore Institute of Directors, are directors of listed companies here.

Given that the CG Code was written for listed companies, it is important that their interests and concerns are adequately represented in the work of the CGAC; having individuals with the right expertise, experience and standing would not only ensure that but also that the work of the CGAC receives the needed support from this quarter.

Still, one wonders if quite so much representation from the boards of listed companies is required to achieve this, and if this has possibly been to the detriment of other stakeholder groups.

Jamie Allen, secretary-general of the Asian Corporate Governance Association (ACGA), whose biennial CG Watch rankings are closely followed in the region, said he found it "disappointing to see so few investors represented on the committee".

Prof Mak echoed that concern, saying that Singapore should not lose sight of the fact that CG is, after all, "about enhancing the long-term value to shareholders and other stakeholders". He hopes "the committee will put investor protection at the forefront when considering recommendations because strong investor protection underpins any strong capital market".

Currently, there are two clear representatives of the investor base on the CGAC; but one could argue that persons like Prof Mak and Ms Bennett would also ensure that investor interests are not sidelined or prejudiced during discussions.

In any case, one hopes that the composition and function of the CGAC remains dynamic and relevant to its time and environment - such that, in the event certain key stakeholder groups' interests prove to be under-represented, MAS would see fit to tweak the appointments on the committee.

At the end of the day, one recognises that it would be impossible - and undesirable - to please everyone. But if MAS keeps its eyes on the right prize and is willing to make the changes necessary to attain that, Singapore can be heartened that it is moving in the right direction.