Speech By Mr Lim Hng Kiang, Minister For Health And Second Minister For Finance, For The Singapore Institute Of Directors (SID) Second AGM Luncheon On 5 December 2000, At The Mandarin Hotel05 Dec 2000
Mr Chew Heng Ching, President of the Singapore Institute of Directors;
Ladies and Gentlemen;
It gives me great pleasure to be here today at your Second Annual General Meeting luncheon.
Improving Singapore's Corporate Regulation and Governance
2 The Singapore government and the private-sector have worked hand-in-hand to enhance Singapore's position as an international business and financial centre. The recent amendments to the Companies Act devoted to improving disclosure requirements for offers to the public, for example, arose from the Corporate Finance Committee's recommendations that Singapore should shift from merit-based regulation to a disclosure-based regulatory regime. These changes help to boost Singapore's status as a world-class financial centre. They help promote innovation, entrepreneurship, efficiency and business flexibility, while protecting the integrity of the securities market.
3 Our effort in improving the business environment is a continuous process. Many of you would know that there are 3 private-sector-led committees studying how we can improve corporate governance and regulation in Singapore. The Corporate Governance Committee, chaired by Mr Koh Boon Hwee, recently posted their consultation paper on the Internet for feedback. The committee has proposed a draft Code of Corporate Governance for listed companies in Singapore. The Code covers areas such as board composition, board performance, directors' remuneration, accountability, and improving communication with shareholders.
4 The Disclosure and Accounting Standards, chaired by Mr Ng Boon Yew, will be posting their consultation paper for comments within the next few days. The third committee on Company Legislation and Regulatory Framework, chaired by Dr Philip Pillai, will be putting up their consultation paper for discussion next year. The Company Legislation and Regulatory Framework Committee cannot complete their work until the recommendations from the other two committees are finalised. I urge everyone to take an active interest in the views and recommendations of all three committees. Offer your feedback and counter proposals so that the final policy positions will be as robust and helpful to business as possible for years into the future.
Importance of Corporate Governance
5 With the shift from merit-based regulation to a disclosure-based regime, investors will place even greater demand on good corporate governance to assure transparency and accountability to shareholders. A recent PriceWaterhouseCoopers Corporate Governance Survey of Institutional Investors showed that 74 percent of investors expect to see high standards of disclosure and accountability in annual reports and financial statements.
6 Increasingly, it will not be sufficient for companies to just flash their financial report cards without assuring investors that they also practise high standards of corporate governance. Companies that simply go through the motions and adopt a minimalist approach in disclosure will increasingly find themselves at a disadvantage when competing for capital in the global market. In the McKinsey Investor Opinion Survey of 200 institutional investors, 89 percent said that they would pay less for the shares of a poorly governed company. As more companies turn to raising capital through the issue of shares and bonds, investor expectations and market discipline will push thesecompanies to improve their level of corporate governance. Well-governed companies will be rewarded by investors, and will have greater access to global capital.
7 The board of directors plays a pivotal role in helping the company achieve high standards of corporate governance. Without a group of committed and qualified directors, corporate governance in the company may just be form with little substance.
8 I am pleased to note that since its inception, the SID has been active in promoting among directors greater awareness of the need for, and good business sense in, high standards of corporate governance. The SID has collaborated with various organisations to conduct seminars and workshops for your members. The Company Directors Course, which aims at raising professional standards of directors in Singapore, has equipped SID members with a good understanding of their responsibilities as company directors. I am very encouraged that SID's Members' Handbook, which serves as a reference for all directors, has also received enthusiastic support from the accounting and legal professions.
9 In moving forward, a challenge for the SID would be to build up a good pool of people who can effectively carry out the oversight responsibilities of company directors. In the Singapore Board of Directors Survey 2000, which some of you here participated in, more than half of the companies (55%) highlighted it is difficult to get suitably qualified directors. The shortage of qualified directors would hamper our efforts in raising first class companies in Singapore.
10 The experience in other countries may provide useful insights in this regard. Apart from conducting training courses for their members, the UK Institute of Directors and the Australian Institute of Company Directors give out awards to members who have passed certain examinations and have acquired relevant experience as company directors. In the UK, it is considered a special honour to be admitted as a ''Chartered Director'', qualified directors wear this badge of professionalism with well-earned pride. In the US, the National Association of Corporate Directors helps companies to locate suitable directors for their boards. The candidates are chosen from a database of eligible members who possess the necessary qualifications.
11 Building a pool of professional directors is by no means an easy task. It would require considerable effort on the part of the SID and other organisations, such as the Singapore Exchange, the Institute of Certified Public Accountants of Singapore, the Investment Management Association of Singapore and the Securities Investors Association of Singapore. Instead of working individually, I would call for greater collaboration among these organisations. A collective effort would allow a more comprehensive approach to raising the capability of directors and the standards of corporate governance.
12 Singapore cannot expect to be a world-class business hub and financial centre if we are lacking in corporate governance. We have to do more. We have to do better. The SID has been a key player in helping raise the level of corporate governance in Singapore. May I congratulate you on all you have been able to accomplish, and encourage you to intensify your efforts.
13 Thank you.