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Gauging the pulse of corporate governance
IT has worked out to be an event-packed year for corporate Singapore on the governance front this year with all the watchwords - disclosure lapses, board oversights, audit and accountability issues - involving some high profile companies having rattled the board-shareholder relationship and kept governance hawks and shareholder advocacy groups rather busy.
Think Singapore Post, which came under intense scrutiny for its disclosure lapses and the issue of board independence and renewal; Swiber Holdings’ holding back of material information and shocking unsuspecting investors by seeking court intervention to survive; and the spillover of Noble Group’s fight with credibility and accounting issues from last year. Just to name a few, that is.
That’s not to say corporate Singapore is knee-deep in the CG blackhole. Not. Even. Close.
Singapore just snagged top spot in the region for CG standards and pipped closest rival Hong Kong in a survey by CLSA and the Asian Corporate Governance Association (ACGA) that tracks over 1,000 companies across 12 Asia-Pacific markets. A KPMG review on how well mainboard-listed firms on SGX obeyed the CG Code disclosures turned up with the verdict - “good with room for improvement”.
At some point soon, Singapore corporates may want to step up and out of that good-with-roomto- improve descript, more so given the regulatory efforts to sharpen the lens on governance matters even as they are challenged by more complex company structures and cross-border elements.
Raising its game on this front is no less than the Singapore Exchange which will carve out its regulatory functions into a distinct entity - this should be up and running by the second half of next year - to rid itself of the conflicts of being both a regulator and a profit-seeking market place - a key step to better guard the local bourse.
There’s more help coming shareholders’ way too. Financial statements ending on or after end 2016 will soon have more details - key audit matters - for investors to wrap their heads around and hopefully, have a clearer picture of the company’s affairs. Fingers crossed that this move inspires value-add information as opposed to boilerplate statements.
In keeping with investor demand for more sustainable behaviour from boards, the SGX now requires companies to report their environmental, social and governance (ESG) metrics beginning from the financial year ending on or after end 2017.
Every governance crisis provides an opportunity for corporates to turn circumspect about the structure they have in place - there’s no perfect template, sadly - and for regulators to identify the loopholes in the maze of good governance rules and attempt to plug them.
It is possibly on the back of this that the Monetary Authority of Singapore deems it timely that the Code of Corporate Governance, first set in ink 15 years ago and last tweaked four years ago, is ripe for another microscopic look.
Back in 2012, the code was reviewed under what was described as “sweeping revamp” which, among others, required that independent directors who have served a board for over nine years trigger a “rigorous review” of their independence.
This was actually a dial-back of an earlier proposal to automatically regard these IDs as non-independent after nine years on the same board; there were concerns that mandated limits on director tenure was far too rigid and would worsen the already limited bench of potential IDs in Singapore.
But even with such a code in place, there are lead IDs who have served the board of companies for over two to three decades.
That begs the question - is tightening the CG code an effective panacea to raise the bar on best business practices here? Arguably, yes. For at best, these principles - tweaked and tinkered with to meet the evolving demands of an ever changing corporate environment - form a guiding light for companies serious about overhauling their boards to ensure best practice and for the best of them, the code offers a bar to reach over and beyond.
Supplement editor: Anita Gabriel Sub-editor: Lilian Lee Cover Design: Jennifer Chua Graphics: Sarah Chua, Elenita Sarah Loyola Advertising sales: Don Lam 9848 2313; Janet Wee 9619 0208; Tom Yuen 9623 1128