Mr Willie Cheng, Chairman of Singapore Institute of Directors
Mr JY Pillay, Chairman of Securities Industry Council
Ladies & Gentlemen
Working together with company directors to raise the bar in corporate governance
1. Good morning. Thank you for inviting me to join all of you for the launch of the Board Guide.
Developments in Corporate Governance
2. The corporate governance systems that we see around the world today have been shaped by national politics, legal traditions and market practices. They are part of the global push for reforms that followed in the wake of the recent global financial crisis. Regulatory harmonisation is continuing to impact corporate governance structures, practices and accounting standards.
3. In addition, the shift in the economic centre of gravity and capital flows towards the East in recent years has put the spotlight on Asian companies and their business practices. As an international financial centre, Singapore’s focus on good corporate governance therefore comes as no surprise. High standards are absolutely crucial for attracting and instilling confidence in investors.
The Case for Corporate Governance
4. It is no coincidence that the etymology of “governance” is the Latin term “gubernare”, meaning “to control or steer”. The Board represents the apex of an organisation’s corporate governance ecosystem, responsible for ensuring its long-term sustainability and charting its course as it navigates through the business environment. How successfully a company does this largely depends on the business acumen of its directors and the skill sets that they collectively bring to the table.
5. The purpose of corporate governance is to promote accountability of the board and management to ensure the long-term sustainability of the company. Much has been said about the fiduciary duties of directors and their responsibility to act in the best interests of the shareholders at all times. When it comes to corporate governance, more often than not however, Boards tend to concentrate efforts on matters surrounding compliance and regulation. This is typically par for the course, given the amount of damage that can result from corporate malfeasance.
6. But conformance to rules, regulations and guidelines is only part of the equation. As fiduciaries, directors are expected to focus on boosting company performance. They must be mindful that besides keeping the company out of trouble, their role also involves value-creation. After all, what good is a business that follows all the rules but is unable to turn a profit?
7. Thus, today’s companies face a vast array of challenges and risks. The Board’s role in strategy development is challenging, because it requires directors to commit the necessary bandwidth to thoroughly understand the business, the industry and risks to the company. Traditional companies are increasingly being disrupted and supplanted by new business models. Directors must therefore be equipped to engage management in robust discussions to help the company prosper.
8. Good corporate governance also entails paying close attention to issues surrounding emerging trends and their associated risks. With the Internet providing greater connectivity and information flow, at times we see headlines on companies falling victim to hacking and data leaks. Consequently, IT governance and cybersecurity have found their place within the Board agenda as directors now have to grapple with these newfound risks.
The Board Guide
9. Taking on the mantle of directorship is by no means an easy task. The extent of responsibilities and liabilities imposed on directors is understandably daunting, especially given the increasing complexity of the business landscape. It is laudable that SID has collaborated with, and received support from ACRA, MAS and SGX, to take on the challenge of providing our directors with a comprehensive series of corporate governance guides.
10. I believe that this Board Guide, which is the main guidebook in the series of Corporate Governance Guides, will serve as a useful resource for current and new directors wanting to learn more about the governance expectations of the Board. In addition to the issues faced by Boards and leading practices, it is replete with frequently asked questions and case studies to illustrate how situations may be handled.
Fostering Corporate Governance Beyond the Guidebooks
11. The Board Guide and the series of guidebooks is one way of fostering good corporate governance. I understand that SID, as the national association of company directors, has many other initiatives in this area:
- SID’s comprehensive professional development framework, and the more than 100 training sessions it conducts for directors each year, have gone a long way in educating directors on their roles and assisting them with their jobs.
- SID’s Singapore Governance Transparency Index assesses and ranks Singapore-listed companies against good corporate governance practices, which companies can use to benchmark and seek to better themselves.
- The Singapore Corporate Awards, which SID organises with the Institute of Singapore Chartered Accountants and the Business Times, recognises excellence in corporate governance.
- So I applaud SID for its efforts to promote the professional development of directors and corporate leaders, as well as to encourage highest standards of corporate governance.
Raising the Bar
12. Last month, the Asian Corporate Governance Association (ACGA) and Credit Lyonnais Securities Asia released its biennial Corporate Governance Watch, which rates the corporate governance performance of 12 Asia Pacific markets. While Singapore has clinched the top spot, Hong Kong remains our closest competitor. If Australia had been formally included in the ranking, we would not have been ranked top. Its score was significantly higher than the Asian countries due to its robust governance ecosystem and more open corporate governance culture.
13. We still have much to learn from Australia’s corporate governance regime. With ACGA’s plans to include Australia in the survey in 2018, the competition will be more intense. It is imperative for Singapore to continuously review where, and how we can improve.
14. Regulation can help promote good behaviour and deter bad behaviour. But, regulation cannot entirely eliminate bad behaviour or fraud. It is therefore important that Boards have to set the culture and tone from the top.
- For example, in the area of board diversity, I am heartened to learn that over 200 companies pledged their commitment for board diversity (including gender diversity) at the launch of another SID Guidebook – Nominating Committee Guidebook – in August last year.
- I applaud these companies for their commitment, and would encourage them to go beyond the Code and disclose their diversity policy and practices in annual reports. This would complement the efforts by the Diversity Action Committee (“DAC”) which has been working hard to increase female representation on the boards and senior management.
15. Before I conclude, do join me in congratulating SID, PwC and the Board Guide Review Panel on the successful completion of the Board Guide. This event marks the culmination of many months of hard work. I am sure that many of you will find value in referencing the guidance material.
16. Thank you.