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Good time to review S'pore's Code of Corporate Governance: MAS

Stakeholders say key areas that could be improved include board renewal, disclosures of corporate governance practices and gender diversity

Ong Chong Tee, deputy managing director of financial supervision at the Monetary Authority of Singapore (MAS) made the point on Monday at the opening of the Securities Investors Association Singapore (SIAS) Corporate Governance Week, which is into its seventh year.


IT may be timely to review the Code of Corporate Governance for listed companies in Singapore given that the last time this took place was in 2012.

Ong Chong Tee, deputy managing director of financial supervision at the Monetary Authority of Singapore (MAS) made the point on Monday at the opening of the Securities Investors Association Singapore (SIAS) Corporate Governance Week, which is into its seventh year.

"Any review will need to carefully weigh the differing perspectives of different stakeholders. What is needed is a balanced and progressive code that not only serves to enhance Singapore's corporate governance standards, but is also pragmatic and workable in practice," he said.

First implemented in 2001, the code is a set of best practice recommendations MAS had issued.

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But the size and sophistication of Singapore's financial sector makes it "neither possible nor realistic" for MAS to detect and prevent all bad behaviours or criminal acts. "It is also not ideal nor desirable for MAS to rely on overly prescriptive and conservative one-size-fits-all rules without inadvertently stifling legitimate business growth and innovation," Mr Ong pointed out.

So, good governance driven by boards must feature as an important frontline defence against bad policies, poor conduct and deficient risk management practices, he said.

A competent management must be complemented by a proactive board that places good corporate governance as a priority area of focus - an area of that will have increased supervisory engagement by the MAS with financial institutions, said Mr Ong.

Besides the need for a diverse board, Mr Ong also touched on the importance of quality disclosures.

Citing a Singapore Exchange (SGX) report issued two months ago, Mr Ong said the findings show that while disclosures are generally adequate, there is room for improvement. "One area, in my view, is for companies to provide better disclosures on remuneration, as well as the link between remuneration and performance. Another area is on more clarity with regard to diversity policies and the company's plans on them."

"Board of directors should set the tone from the top, and to walk the talk so that there is resonance from the tone in the middle and tone at the front business units," Mr Ong noted.

In his opening address, David Gerald, president and chief executive of SIAS, urged regulators to consider requiring boards to have a formal independent review of long-time independent directors, and to have the report made public to shareholders.

The current code recommends a rigorous review of the independence of any director who has served for more than nine years, but an SIAS review found several companies with lead independent directors who have served on the board for 24-30 years. This particular issue was also raised by corporate governance advocate Mak Yuen Teen, who said the guideline recommending such a review "has been met with many boilerplate statements and occasionally external consultants doing meaningless confirmation of independence after nine years". This topic, he said, needs revisiting, especially in light of the SingPost saga.

He noted that board renewal and succession planning "is an area of significant weakness in many companies" and that the current code does not have much emphasis on this.

"I think we should also look at making some guidelines mandatory especially those related to disclosures of corporate governance practices such as number and attendance of meetings and director biographical information. This is the case in the United Kingdom and Australia," said Prof Mak.

Stefanie Yuen Thio, TSMP Law's joint managing director, pointed out that nine years should be a hard limit for directors to hold a board seat, and should not be subject to review only. "Even if there are no business transactions or relationships that might make someone less than independent, spending nine years on a board will risk entrenching interests and build personal ties that could potentially compromise independence."

She proposed that there be hard limits on the number of listed company directorships an individual can have, adding that the role of a board in overseeing management should be clearly demarcated from operational management of the group. "To this end, all mainboard-listed companies should have a majority of independent directors. Currently, this is only a requirement where certain conditions are met, for example, if the chairman and chief executive are the same person or are related," Mrs Thio said.

Annabelle Yip, WongPartnership's joint head of corporate governance and compliance, said the existing code remains current, adding that it may be timely to review what provisions of the code should be hardwired into the listing rules or into law. "Also, in areas where progress is urgent but the pace of change has been slow, for example, in the area of gender diversity, query whether or not a stronger provision in the code, requiring disclosure of a breakdown in numbers or percentage of board or senior management roles by gender, or disclosure of a gender diversity policy, should be included," she said.

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