BOARDS of directors play a key role in ensuring transparency, accountability, performance orientation, good processes and practices in companies.
The Business Times speaks to gold award winners of Best Managed Board at the Singapore Corporate Awards 2023 for their take on various issues surrounding corporate governance.
ROUNDTABLE PANELLISTS:
- Danny Teoh, chairman, Keppel Corporation
- Michael Lau, chairman, Sing Investments & Finance
- Rolando C Gapud, executive chairman, Del Monte Pacific
- Wong Kan Seng, chairman, UOB
Moderator: Megan Cheah, journalist, The Business Times
The Covid-19 pandemic is now mostly behind us, but macroeconomic headwinds and rising inflation continue to be daunting obstacles. How has the role of the board evolved over the last few years to guide the company through these issues?
Michael Lau: Our board continued to focus on the long-term strategic direction of the company and monitoring the execution of business plans, even during the pandemic. However, more time was spent during the pandemic on the identification and management of risks arising from the global epidemic.
As there was much uncertainty, especially during the early phases of the pandemic, the board together with management spent considerable time discussing how to manage and navigate through the unprecedented crisis.
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The board provided guidance and input to management in coping with the uncertainties and in managing our business, particularly supporting our customers and meeting their needs.
Rolando C Gapud: Fiscal management requires a holistic approach beyond improving profitability with equal emphasis on balance sheet management and cash flow generation, especially in a high interest rate environment.
The board, together with senior management, has a fiduciary role to exercise financial prudence and create value for its shareholders.
The board has played an important strategic role in steering the company’s long-term growth by focusing on branded businesses, agile innovation and digital transformation.
Danny Teoh: The volatile macroeconomic environment and evolving expectations of stakeholders have increased the complexity of the roles played by boards, and tested the agility of a company’s strategy.
Amid the Covid-19 pandemic, we launched Keppel’s Vision 2030, a road map to transform the company from a conglomerate of diverse parts into one integrated business, providing sustainability solutions.
In May 2023, we also unveiled the next phase of Keppel’s transformation to be a global asset manager with deep operating capabilities in infrastructure, real estate and connectivity.
Wong Kan Seng: In keeping with our longstanding focus on balancing growth with stability, the board has consistently guided management to ensure the resilience of our franchise across different markets.
In this post-pandemic world, where we face new challenges and opportunities amid rapid digitalisation and recalibration of global supply chains, the board has guided UOB to focus on building capabilities to support three key growth drivers – connectivity, personalisation and sustainability.
Staying abreast of digital growth opportunities, the board also reviewed initiatives related to innovation and technology, such as blockchain and digital asset, and supported management on key digital transformation initiatives, resulting in new services being launched across the region.
What corporate governance-related challenges has the board faced in a post-Covid environment filled with economic uncertainty?
Gapud: Given the global sustainability issues that emerged from the Covid-19 pandemic, there is a heightened awareness and level of engagement with respect to environmental sustainability and governance.
With respect to corporate governance at the board level, board diversity, independence of directors, succession plan, remuneration, the linkage to environmental, social and governance (ESG) goals and talent retention at the management level have all gained more attention in this environment.
In recent years, we have updated our environmental, food safety and quality policies, as well as issued a new health statement, supplier code of conduct and risk appetite statement.
Wong: As the pandemic entered a new phase and governments scaled back support measures, the board stayed vigilant in monitoring the operating environment.
This includes regular stress tests of various scenarios, given the ongoing and emerging economic, geopolitical and environmental uncertainties.
The board also keeps a close watch on ensuring that the group’s portfolio is resilient, and the balance sheet remains strong.
As we adapt to the new ways of doing business, we remain focused on creating long-term value for our customers and stakeholders.
Teoh: One key challenge for the board was collectively coming to a landing on the plausible scenarios of the future state of the world.
Almost exactly a year ago, Keppel conducted a scenario planning exercise, where we explored three scenarios in the 2030 timeframe covering a range of issues, including the global geopolitical, economic and financial situation, as well as climate change and the energy transition.
The exercise did not assign probabilities to specific future conditions, but rather served to generate inputs to the board and management when considering the company’s strategy, while also identifying risks and opportunities.
Lau: Strong risk oversight by the board helps us to respond to the growing uncertainties in our operating environment, while remaining focused and agile in meeting our customers’ needs.
Besides heightened risks of economic slowdown and significantly higher interest rates, we also face risks and challenges in our business and operations, including liquidity and operation risks.
For example, our digital channels enable our customers to carry out transactions more efficiently, but with digitisation comes additional risk.
Alongside investing in systems and human resources to manage such risks, we also have to spend considerable time and effort to educate our customers about such risks, to help them conduct their transactions online securely and safely.
Board diversity has undergone much scrutiny in recent years. How can a diverse board help companies be accountable and transparent to its relevant stakeholders?
Teoh: Our board diversity policy guides Keppel’s board in setting both qualitative and quantitative objectives for achieving diversity, as well as assessing the progress in achieving these objectives on an annual basis.
In line with Keppel’s Vision 2030 strategy, we have, in recent years, onboarded directors who have oversight of and operational experience in our focus areas such as sustainability-as-a-business, driving digitalisation as a corporate strategy, and private equity or asset management.
We are now embarking on a new rolling three-year board diversity objective for FY2023 to FY2025, in line with our pivot to be a global alternative real asset manager and operator.
Lau: A diverse board helps improve the quality of the decision-making process by bringing together a variety of perspectives, experiences and skill sets to the board’s deliberations and decision-making.
Such a board would also better represent the interests of shareholders and other stakeholders.
The appointment of directors should reflect a need to add complementary skills and experience to the board. We believe that board appointments should be made on the basis of merit, with due regard to diversity.
Wong: We believe that a diversity of views will provide a comprehensive range of perspectives and contribute to robust discussions.
The board conducts an annual review of our collective skills and expertise, as well as the composition of our committees to ensure the right mix of skills, expertise and experience for UOB, taking into account its strategies and aspirations.
Our formal board diversity policy covers functional and domain skills, regional experience, industry experience, age, gender, ethnicity and culture, tenure and independence, among other criteria.
We review and update our stakeholders on our diversity targets each year.
There is now a huge focus on ESG trends and investors are concerned about the impact of their investments. How has the board shaped the company’s sustainability strategy and encouraged corporate social responsibility to meet investors’ concerns?
Lau: The board believes that focus on ESG, sustainability and climate risk issues would help us in achieving sustainable growth and to create long-term value for our shareholders and other stakeholders.
Our board plays a key role not only in approving and overseeing the implementation of our ESG, sustainability and climate risk framework and policies, but also in setting the right tone at the top to embrace policies and practices that promote sustainability, good governance and corporate social responsibility.
These include being environmentally friendly; promoting equality, diversity and inclusion in the workplace; giving back to the community via corporate programmes for the underprivileged; and ensuring business decisions are ethical.
Wong: A central focus for the board is to guide the group in adopting a progressive and pragmatic approach to sustainability. Financial institutions play an important role in channelling resources to where it matters most.
At UOB, we want to help our customers fight climate change and transition to more sustainable practices, while ensuring that lives and livelihoods continue to improve.
In this regard, the board has guided management to advocate for a just and orderly transition to net-zero emissions, as it considers the influence and impact UOB’s decisions and actions may have on our stakeholders, the environment and society, as well as the market realities of the region that we operate in.
Gapud: As there has been an increasing focus on ESG among investors and other stakeholders, sustainability is a regular board agenda.
The various committees also address ESG matters such as climate-related risk management, corporate governance and sustainability key performance indicators of the leadership team.
Del Monte Pacific’s sustainability framework has six pillars which address the needs of our stakeholders, including developing communities, preserving nature, strengthening governance and sustaining growth.
The board ultimately oversees the approval of sustainability plans and policies, and tracks their progress and performance.
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