Speech By Mrs Josephine Teo, Senior Minister of State for Finance and Transport, at the Singapore Corporate Awards Seminar 201419 May 2014
1 Thank you for inviting me to the Singapore Corporate Awards Seminar 2014.
2 Like most of you, I don’t get round to watching television much, but on several occasions, I caught episodes of this reality TV programme called “Undercover Boss”. The storyline is quite predictable:
• Boss inevitably discovers, while in disguise as a new recruit, aspects of the business that he or she didn’t know about, for example, facilities that are dilapidated, equipment that is in poor condition or unsuitable for use, staff who are poorly trained, customers who are disgusted or think poorly of the company - things that make the undercover boss quite surprised.
• Boss decides to do something to make things right – many a times, recognising staff and supporting them in their difficulties.
3 As predictable as the programme is, the show is watchable and entertaining. You want to wait till the end to see what the boss does, which are usually nice things. It brings a little smile to your face (and helps you sleep a little better). In spite of criticisms, “Undercover Boss” is a great success by any measure:
• Franchises in 10 countries and growing
• Primetime Emmy Award for Outstanding Reality Program in 2012 and 2013
• Will enter its 6th season
Businesses: a force to uplift people and societies
4 I wonder why “Undercover Boss” is so successful, and what does it tell us? Speaking for myself, the appeal of the show is two-fold:
• 3As: appalling and amusing to see bosses find out what’s really going on in their businesses; re-assuring at the same time to see them publicly admit mistakes when things aren’t going well, and then make things right.
• When bosses do something for the staff that is potentially transformative for the individual, it reminds us that businesses can do much more than make money. And apart from benefitting shareholders, businesses have the power to benefit people, communities and society.
5 In my previous role as a labour MP, I witnessed first-hand the contrasting impact on workers in companies that were well-managed and those where the bosses couldn’t care less. It wasn’t just the pay and benefits; it was also the way in which people in the companies interacted with one another, and with people outside the companies.
6 Being part of a successful and nurturing organisation has an interesting way of uplifting a person – it influences your outlook in life and your confidence about the future, which in turn impacts willingness and ability to adapt to changes. This was why, as a unionist, I always said to employers, “tell me how we can help you be more successful, because when you are successful, you are in a better position to help our members the workers lead more successful lives.”
7 The impact of businesses is, of course, not confined to their employees. Successful businesses can also bring new innovations to market that improve the quality of life, as well as support worthy causes, whether charitable or in the arts and culture.
Corporate sector plays a vital role in nation building
8 In the Singapore context, the concept of Total Defence, which was introduced 30 years ago in 1984, embodies the idea of economic defence, that is the government, business and industry organising themselves in such a way that our economy will not break down under the threat of war or crisis.
9 Economic defence involves the economic sector sharing material and manpower resources to meet the needs of civil and military defence. This means putting in place robust economic systems that can continue to function in times of crisis. When our economic fundamentals are strong, our economy will not break down so easily in times of war or crisis. That is the idea behind economic defence.
10 It is therefore, no exaggeration to say that the economic and corporate sector development is thought of as integral to the process of nation-building in Singapore, a task which just last Friday, President Dr Tony Tan reminded us is still very much work-in progress. Dr Tan was speaking at the opening of the second session of the 12th Parliament.
11 As I listened to the President, two points in particular struck me as being relevant to today’s gathering. First, he said “Singapore must remain a nation of opportunities for all. Those who do not succeed at first should have a second chance, indeed must always have the chance to try again. We want an open and inclusive society, where all have opportunities to learn, and to earn our own success; where we respect fellow Singaporeans, regardless of social status, for the worth we see in everyone; and where we interact informally with one another free of rigid social hierarchy.”
12 Elaborating on this theme, President Tan outlined the Government’s intentions on the education front. But in my mind, besides working through education, the realisation of Singapore as ‘a nation of opportunities for all’ also depends on the kind of the corporate and business sector that we have.
13 For example, are new ideas and innovations being introduced in a way that keeps pace with global developments or are we constantly lagging behind? Is there room for entrepreneurship so that people with diverse talents can get a foothold in the marketplace, and those who have tried and failed gets a chance for another go?
14 In organisations, can people advance on the basis of their skills and contributions, or do their backgrounds and affiliations confer disproportionate advantage? Does the workplace culture in Singapore encourage people to value and learn from everyone, or are we unable to see past rank and social status? Do people have the means to live healthier and fuller lives? These to me are questions that are related to the idea of a nation of opportunities, and which the corporate and economic sectors are very much involved in helping to realise.
15 Singapore celebrates our Golden Jubilee next year, and it was in this context that the President made a second point which is relevant to today’s discussion. He called on us to honour the pioneering generation of Singaporeans and said “the best way ……. is to uphold this same pioneering spirit – to dream and fight for Singapore. We must be stewards of our Pioneers’ success.”
16 The idea of being ‘stewards of our Pioneers’ success’ is a reminder that for our society to continue to thrive, we have to see ourselves as some sort of a caretaker for the next generation, seeking benefits not only for ourselves but also for the people around us and those who will come after us.
17 It absolutely has to do with sustainability because the prolonged absence of stewardship almost certainly spells the end of any human enterprise. Stewards hip is therefore an equally relevant and important idea for the corporate sector, in particular for corporate governance.
Do the right thing even when no one is watching
18 Earlier this year, Willie had contributed an interesting article on corporate governance to the Business Times. In that article titled “Corporate Governance: Why Bother?”, he cited a comment made half in jest by a CEO of a major listed company and the CEO said, “You know, corporate governance is for the other guy.” I suppose the sub-text is “only a fool takes it seriously.”
19 Corporate governance is indeed ‘for the other guy’ but not in the same way the CEO intended. When ‘the other guy’ is the customer of a food business, sound corporate governance could mean the difference between high quality and suspicious substances in the products sold. When ‘the other guy’ is the supplier, sound corporate governance could be the difference between timely payments and untimely death due to a mountain of unpaid debts.
20 Therefore, it isn’t a bad thing at all when we say ‘corporate governance is for the other guy’ and mean that we will do the right thing for our customers, our shareholders, our suppliers, our employees and our industry, even when no one is watching. It is hopefully in this spirit of - “doing the right thing even when no one is watching” - that corporate leaders embrace corporate governance.
Ensuring compliance with statutory requirements
21 Of course, someone is watching. Among others, the Accounting and Corporate Regulatory Authority (ACRA) ensures compliance with the Companies Act, which requires a director to act honestly and use reasonable diligence in the discharge of his duties at all times. It may come as a surprise to you that ACRA issues about 10,000 summonses every year for failure to hold annual general meetings, keep proper accounting records and file annual returns, all of which are fairly basic requirements.
22 ACRA’s statistics show that most of the offenders are directors of smaller and newer companies and one could argue that given their limited resources, such companies should be forgiven, or perhaps the rules should be relaxed. In fact, ACRA reviews its rules consistently to ensure that regulation does not erode the ease of doing business. Nonetheless, it is important, that we cultivate from a very early stage of doing business in Singapore, the culture of doing the right things, in particular playing by the rules.
23 Some of you may recall that last month, the State Court meted out higher fines against three errant company directors for multiple or repeated breaches of the two basic requirements to hold annual general meetings and file annual returns. For large companies with public interest that are persistently non-compliant, ACRA is seeking to raise fines as deterrence. Penalties are part of the regulator’s toolbox, but one hopes, really, that the culture of good corporate governance is so pervasive that ACRA does not need to keep expanding its toolbox.
Beyond statutory requirements – building a culture of “doing right”
24 Let me say something about the Code of Corporate Governance before I close. You may recall that I started this session by talking about the reality TV programme “Undercover Boss” and why I think it appeals to people. It has to do with the idea that there are right ways of running a business, and when bosses discover the ways in which their companies have fallen short, instead of just being embarrassed, they do something to set things right.
25 The Code of Corporate Governance has essentially the same idea, that in running a listed company, there are expectations we have of directors, over and above their fiduciary duties to shareholders. In adopting a comply-or-explain approach, we accept that there may be circumstances that make it particularly challenging or even unhelpful for the business to align itself with the Code. But it is the director’s duty and obligation to examine the reasons for non-compliance, explain these reasons properly and where appropriate set out the roadmap for future compliance. And it is in this area that I think we have some distance to go.
26 Since the revised Code was published in May 2012, there have been quite a number of occasions where the reasons for non-compliance have been poorly explained, leading to calls to mandate compliance with parts of the Code or the entire Code, so as to standardise the quality of disclosure among listed companies.
27 Rather than mandate compliance with the Code, we have adopted a market-driven and disclosure-based regime in Singapore that relies principally on market discipline for enforcement. It recognises that apart from the regulators, shareholders and other players in the ecosystem, including auditors, analysts, professional bodies and media, can exercise their influence.
28 Each of these players in the ecosystem also has stewardship responsibilities, to act in the interest of “the other guy” who has a stake in the proper governing of the business but who doesn’t necessarily have a voice. Don’t forget too, each of us is potentially “the other guy”, in more ways than we can imagine, and so it pays for all of us to collectively to behave more like stewards in all the roles that we play.
29 To drive excellence in corporate governance, it is perhaps helpful to think once again of the corporate sector in the context of nation-building, a theme which occurred to me when listening to the President last Friday.
30 Businesses exist as part of our larger society. They have the power to benefit not just shareholders, but also employees, their families and communities. The pursuit of excellence in corporate governance signals the directors’ strong intent to be good stewards. Because of that, the business is more likely to be sustainable, more likely to bring benefits to society, and more deserving of further resources.
31 Businesses should therefore, not see corporate governance as a chore to satisfy the nosy regulators or public. Instead, see excellence in corporate governance as part of a culture of doing right, and a contribution to a well-functioning economic sector that puts a premium on trust and integrity, because of which Singapore, Singaporeans and all Singapore-based companies are better-off.
32 Thank you once again for inviting me, and I wish you a very good discussion later today.