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Public Consultation By Corporate Governance Committee

24 Nov 2000

The Corporate Governance Committee ("CGC") was established to review the development and promotion of best practices in corporate governance, especially among public-listed companies in Singapore. (More details can be found in the Appendix.)

Scope of CGC's Review

The Committee studied the international best practices of corporate governance in major jurisdictions (e.g. the UK Combined Code, the Australian Bosch Report, the Canadian Dey Report, the US Blue Ribbon Committee and the OECD Principles of Corporate Governance) and examined the circumstances facing listed companies in Singapore.

After extensive deliberations, the Committee recommends that Singapore should have a Code of Corporate Governance that contains the best corporate governance practices, to serve as a model and benchmark for Singapore companies to strive towards. In particular, the Committee focused on four main areas, which are key tenets that underlie good corporate governance:

Board Matters;
Remuneration Matters;
Accountability and Audit; and
Communication with Shareholders.

Despite faring well in global competitiveness rankings, Singapore had lagged in several areas on corporate governance. Increasingly, investors, especially international institutional investors, are demanding high corporate governance standards in companies that they invest in. The Committee hopes that this Code will provide guidance on corporate governance principles that will spur Singapore companies to improve their boardroom practices.

Key Recommendations in the Code

Companies are encouraged, as a best practice, to adopt the recommendations set out in the Code. Legislation of the Code is not recommended. This is in line with Singapore's move from a merit-based regime to a disclosure-based regime.

The Committee proposes that listed companies be required to disclose their corporate governance practices with specific references to each of the guidelines set out in the Code. Where they deviate from these best practices, companies should disclose the variations, with appropriate explanations. This disclosure requirement would be reflected in SGX's Listing Manual. It is envisaged that the Code would be annexed to the Listing Manual.

The Committee will be recommending numerous corporate governance best practices. Among the major ones are:

To ensure a formal and transparent process for the appointment of new directors, companies should establish a Nominating Committee. The Nominating Committee is also expected to propose objective performance criteria that measure how the Board has enhanced long-term shareholders' value;
The Board should also establish a Remuneration Committee. This will lead to a formal and transparent procedure for fixing remuneration packages of individual directors so that the remuneration of directors and senior executives reflects their performance and contribution to the company. The Code also provides more clarity on the principles of compensating executive versus non-executive directors, such that no director is involved in deciding his own remuneration;
The Code recommends that at least a third of the board should be independent. In this regard, the Code has laid down clearer and stricter guidelines on the definition of independence. Companies should also specify clear measures for evaluating board performance, and provide improved disclosures of directors' background and qualifications.
The CGC believes that it is important for Audit Committees to be made up entirely of non-executive directors, which is a departure from the current practice where executive directors can sit on audit Committees. The Committee feels that while an Audit Committee has a right to request the presence of an executive director at its meetings, it should not have executive directors as its members; and
Companies should provide timely and fair disclosure to all shareholders.

Public Consultation Website

The Committee has come to some preliminary views on the various aspects of corporate governance. The Committee wishes to enhance and strengthen the final report through feedback and further ideas from the public.

We invite interested parties to visit the public consultation website at to provide their comments and feedback on the consultation paper. The website will be hosted on the Ministry of Finance homepage with links from the Registry of Companies and Businesses and the Monetary Authority of Singapore homepages. The public may send in their comments via email to or via fax to 337 4134.

The public consultation will be opened till 31 December 2000. The committee will consider all feedback, and finalise its recommendations by the first quarter of 2001.

Public consultation by the other two review committees

Besides the CGC, the Government has also set up the Disclosure and Accounting Standards Committee ("DASC") and the Company Legislation and Regulatory Framework Committee ("CLRFC").

The DASC will be posting its consultation paper on the Internet for public feedback in early December 2000. The CLRFC's consultation paper will be ready for discussion next year, as the CLRFC cannot complete its work until the recommendations from the other two committees are finalised.


Background and Objective of the Committee

Corporate regulation and governance has emerged as one of the critical areas of well functioning economies. Singapore needs to move quickly to align ourselves with the highest standards and practices of excellence in corporate governance. We need to ensure that our corporate regulatory framework remains conducive to enterprise, while ensuring that the interests of the investing public are looked after. This is especially so as Singapore moves towards a disclosure-based regime.

The Corporate Governance Committee (CGC) was set up to review the development and promotion of best practices in corporate governance, especially among public-listed companies in Singapore. Members of the CGC include distinguished representatives from various pertinent groups - directors, lawyers, accountants, fund managers, investment bankers, businessmen and regulators. The Committee members were drawn from sectors that can best express the needs of the market and business environment.