Can corporate governance be tailored to support innovation?

IT'S widely accepted that innovation is an imperative in today's digital economy where industries are being disrupted by rapid advances in technology. There's no lack of initiatives and alliances, not least in Singapore, to help companies in their efforts to innovate, come up with new business ideas and move into new markets.

One key issue to consider is whether current corporate governance, with its emphasis on shareholder protection and oversight of company behaviour, can play an effective role in nurturing innovation. This is because modern corporate governance rules have generally not been designed on the basis of "how do we create the most innovative organisations?" Rather, the guiding principle has been "how do we protect shareholders?" And the problem is that the two objectives may not necessarily always be congruent.

For protection, the focus has traditionally been on safeguarding the interests of minority shareholders. To achieve this, the main control mechanisms embodied in codes of conduct and listing requirements usually require a strong element of independence within the board and its committees to monitor the behaviour of company insiders.