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What makes an effective board
- Melvyn Pun, chief executive officer & executive director, Yoma Strategic Holdings Limited
- Lee Sze Leong, managing director & chief executive officer, Sing Investments & Finance Limited
- Neo Boon Siong, independent director, Keppel Telecommunications & Transportation Limited
- Sumitri Menon, chairman, Micro-Mechanics (Holdings) Limited
- Wong Teek Son, executive chairman & chief executive officer, Riverstone Holdings Limited
Moderator: Grace So, The Business Times
Question: What is the biggest hallmark of a well-run board?
Melvyn Pun: It is important to have a well-rounded board with diverse expertise and background to give an objective perspective on a company's strategic direction and growth. The board should have an environment that fosters open, rigorous and constructive debates to safeguard the company's values and reputation.
Currently, our board comprises eight directors of which four are non-executive independent directors. Our non-executive independent directors have strong financial, legal, human resource and business management backgrounds that complement one another. This facilitates an effective dialogue between the board and management so that a consensus is forged and helps to ensure that decisions finally taken are sound.
Lee Sze Leong: An effective board with the appropriate and diverse mix of skill and experience is the biggest hallmark of a well-run board. Effective board oversight is crucial in any industry, but for a financial institution like us, it is the central element of a financially sound and well-managed financial institution. To provide leadership and set the direction of our finance company, the board as a whole needs appropriate skills to understand and critically examine the business fundamentals, risk management, progress and opportunities of the company.
Neo Boon Siong: A board needs to be strong and independent in order to fulfil its responsibilities well. Such a board would have well-defined responsibilities, and be supported by high-functioning board committees whose members trust and challenge one another and engage directly with senior management on critical issues facing the company. A board's size and composition also has bearing on its effectiveness and this should be balanced to build up core expertise and facilitate decision-making.
Sumitri Menon: The active participation of suitably appointed board members and sound rigorous processes.
Wong Teek Son: The mark of a well-run board lies in the directors' collective ability to ensure a company's prosperity whilst also acting in the interest of their stakeholders. Some of Riverstone's fundamental principles for good corporate governance focus on ensuring a proper balance of power and authority, transparency, independence and diversity of all directors and the establishment of strong risk management and internal controls to counteract any errors or irregularities. While the responsibilities of a board remain on guiding the strategic objectives and direction of a company, good corporate governance is essential for the sustainability of our company's health and business.
Question: What board achievement are you proudest of over the past year?
Mr Pun: I feel that our board has been able to strategically assess the opportunities in Myanmar and our group's strength, and this has resulted in the decision to focus on our three core businesses. Oftentimes, it's the tough decision we make to not enter into certain businesses that had the most benefits in hindsight.
In the past year, our strategic decision to diversify helped us weather the slowdown in the real estate markets. Driven by the more than doubling of our real estate and consumer businesses and the growth from our telecom towers business, we delivered a set of strong results in difficult circumstances. Our businesses are all in stronger positions than ever helmed by an excellent and stable senior executive team. This gives us a great platform for the coming years ahead.
Mr Lee: The board achievement that I am proudest of over the past year is when the board won Bronze for the Best Managed Board (for companies with S$300 million in market capitalisation), at the Singapore Corporate Awards 2015. This award gives recognition and acknowledgement for the overall quality of a board's corporate governance practices, among Singapore-listed companies. This year, we made another remarkable achievement by winning the gold award. It proves that our board is committed to and consistent in maintaining high standards of corporate governance practices.
Prof Neo: Managing succession and fortifying the bench strength have been key areas of focus for the Keppel T&T board. Last year, we filled key positions for CFO of Keppel T&T and the CEOs for the data centre and logistics divisions with experienced industry professionals. The capable team that we have put in place will take Keppel T&T forward, working closely with the board to build business resilience and create sustainable value for our stakeholders.
Ms Menon: Micro-Mechanics Holdings Limited has won several awards for good governance and last year, our board was again awarded the Silver Best Managed Board Award by the Singapore Corporate Governance committee. Such validation is satisfying and acts as a spur to go to the next level. Outside the public domain I am proud of our board's ability to vigorously debate issues.
Mr Wong: The board's focus and dedication on growing our business over the past year has resulted in a 146 per cent jump in share price from Dec 31, 2014 to S$2.40 as at Dec 31, 2015. As a result, Riverstone was also ranked the best performing stock by the Singapore Exchange (SGX). At the same time, the board has also worked hard to improve our Governance and Transparency Index (GTI) score, which takes into account the financial transparency of a Singapore listed company based on publicly available information. We have been consistently improving this score for the past three years.
Question: What is the biggest challenge in Singapore's corporate governance landscape right now?
Mr Pun: Generally speaking, the biggest challenge is for companies to adopt a change in mindset. This means viewing corporate governance as not just the strict adherence to rules and regulations, but a strategic direction of being guided by responsible business practices. Decision making needs to be taken to benefit all stakeholders.
Mr Lee: The biggest challenge now is to improve transparency. The principle of "transparency" is fundamental to good corporate governance. With growing exposure, shareholders and investors are increasingly demanding greater transparency and they expect companies to provide more meaningful disclosures. On the other hand, boards face the constant challenge of deciding how much to disclose and when to disclose. Some of the disclosures may not be beneficial to the company. We have to strike a good balance between detailed disclosure and confidentiality in sensitive areas.
Prof Neo: Taking risks is part and parcel of business activity, however, companies must focus on achieving growth and profitability within appropriate boundaries. From a corporate governance perspective, effective risk management continues to be one of the biggest challenges.
Good risk management gives comfort to stakeholders that a business is being managed well and keeps the company aligned with corporate governance objectives. Keppel T&T's board risk committee assists our board in reviewing and maintaining a sound risk management system for the company. The board risk committee also reviews and guides management in developing risk policies and internal controls to safeguard shareholders' interests and the company's assets.
A balanced approach to risk management, supported by robust systems, will equip companies to undertake appropriate and well-considered risks that optimise returns.
Ms Menon: Complexity and the rapid pace of change and the consequential increase in the resources required. This is especially so for smaller companies which make up the bulk of SGX listed companies.
Every aspect of good governance, if it is to be done right, takes substantial resources of time and money whether it is undertaking a rigorous search for the right board candidate or getting that internal audit process pinned down or undertaking sustainability reporting and preparing for the future, all of which being done of course whilst attending to growing the business.
Mr Wong: The international corporate governance landscape is constantly changing and a big challenge for Singapore is keeping up in order to uphold long-term confidence and integrity in our market. For example, SGX introduced in January 2016 rules and guidelines for sustainability reporting. This report is in response to growing global demand for more non-financial information and will result in greater transparency on a company's corporate governance. In addition to this report, the GTI is also a Singapore initiative aimed at maintaining the country's internationally recognised image for high standards of governance. The GTI is adopted from other global corporate governance models and is flexible to changes in the business environment.
Question: How do you balance fast-paced growth with upholding corporate governance standards?
Mr Pun: We take a three-pronged approach:
1. Our focus on three core businesses allows us to stay within our circle of competencies. In each area, we have adopted comprehensive corporate standards and policies to govern our operations;
2. A strong, on-the-ground risk management team actively engages businesses and report to the board; and
3. Our distinct corporate culture of responsible business practice coupled with regular management gatherings that repeatedly reinforces our values.
We do not pursue growth for its own sake but weigh and balance it with our corporate values. In recognition of the board, management and staff's continuous commitment to corporate governance, we have won several accolades, including being ranked 17th among Singapore 100 largest listed companies in the Asean Corporate Governance 2015. Our affiliate, the SPA Group, was also recognised as the Most Transparent Company in Myanmar by Myanmar Centre for Responsible Business in 2015.
Mr Lee: Fast-paced growth has brought both benefits and challenges to corporations. It brings about not only new economic opportunities but also new social and institutional complexities. As such, to strike a balance between allocation of resources in a fast-paced growth environment to maximise profit opportunity and upholding corporate governance standards is never easy. Our board has instilled a good corporate culture in our company to emphasise the key factors to achieve an appropriate balance in fast-paced growth and upholding corporate governance standards. With the right values, we constantly have to identify and review corporate governance frameworks and put in place mechanisms that promote greater transparency and accountability, while at the same time ensuring the profitability of the company. As a finance company, we believe that a sound risk management and robust internal controls are essential in safeguarding the interests of our stakeholders.
Prof Neo: Good corporate governance is essential to the sustainable growth of a company, and is at the heart of Keppel's core values and operating principles. Parallel to striving for business excellence, Keppel T&T seeks to safeguard the interests of multiple stakeholder groups, including minority shareholders, through robust corporate governance practices as well as fair and timely disclosures. By improving the quality of business management, we can ensure greater efficiency and effectiveness alongside integrity, accountability and transparency.
Ms Menon: As mentioned earlier, this is particularly challenging for smaller companies. Companies need good people with a deep understanding of the fundamental concepts behind good governance and the ability or a process for inculcating good practices throughout the organisation.
Mr Wong: It is always important to have in place a comprehensive framework for internal controls so as to develop a culture of accountability and risk management. By adhering to the code of corporate governance as well as company-specific procedures and practices, this will ultimately keep us focused on the right path as we grow our business. At the end of the day, a company needs to cultivate a set of values and standards where corporate governance is seen as guiding principles rather than just a compliance exercise.
Question: How does the board prepare itself for the future economy?
Mr Pun: Myanmar has gone through major changes over the last five years and will continue to change at a rapid pace. To adapt continuously, our board and management work collaboratively to set out our strategic priorities. A meeting is held in Myanmar once a year to explore the changing landscape, while an annual strategy session is held to assess our long-term plans.
We are active participants in major international organisations such as the World Economic Forum to keep close to the latest global trends and the future economy, while the group has formed partnerships with technology companies to improve operational efficiencies and better serve our customers.
Mr Lee: Our board strives to constantly build a forward-looking team that formally conducts market and competitive landscape reviews.
This forward-looking imperative comes in part from the way long-term economic, technological, and demographic trends are radically reshaping the global and the local economy.
In a globalised world, informed and knowledgeable directors would be able to help identify often dangerous, "unknown" difficulties on the horizon.
Rather than seeing the job as merely supporting the management team, our board will engage in strategic discussions, form independent opinions, and work closely with the executive team to make sure long-term goals are well formulated and subsequently met.
Prof Neo: Succession planning and leadership development are key. The board is focused on ensuring that the company is managed by a qualified and experienced management team whose members are abreast of pertinent industry developments.
In this respect, Keppel T&T employs a comprehensive leadership and talent management programme that takes into consideration the company's future needs and augments deployment opportunities to build bench strength.
Keppel T&T's board members are regularly updated on the industry, new projects and initiatives, which help them stay abreast of the company's businesses and equip them with relevant industry knowledge.
Board members also attend the company's annual offsite meeting where strategic issues and directions are deliberated, thereby encouraging open and constructive discussions between the board and management.
Ms Menon: By being flexible and boldly embarking on an innovative undertaking even if it is difficult to make the usual predictions about it, but always ensuring that there are sufficient resources to meet whatever challenges thrown up and at the same time by carefully nurturing, husbanding and growing those aspects of the business that have been or are doing well at present.
Mr Wong: As the board's primary responsibility is to maintain and enhance shareholder value in the long run, it is imperative that we select directors with varied and relevant work experience as well as strong financial and business backgrounds so as to value-add the decision-making process for corporate strategies.
I also think that we as directors need to be progressive, adaptable and relevant in order to stay ahead of the constantly changing economy.
This involves keeping ourselves up to date and being early adopters of any changes in regulations or procedures while not losing sight of our fundamental principles of integrity and accountability.