Guest-of-Honour’s Address by Ms Indranee Rajah, Second Minister for Finance and Education, at the Singapore Institute of Directors Directors Conference 2018, 7 September 2018, Marina Bay Sands Expo & Convention Centre07 Sep 2018
Unlocking value through good governance and globalisation:
The importance of corporate leadership
Mr. Willie Cheng
Chairman of Singapore Institute of Directors
Distinguished Guests, Ladies and Gentlemen
1. Good morning. Thank you for inviting me to join you at the ninth edition of the Singapore Institute of Directors’ flagship annual conference. This is a valuable forum for directors and corporate leaders, like yourselves, to discuss and explore pertinent issues relevant to the companies on whose Boards you serve.
2. This year’s theme, on “Rebooting Globalisation and Governance in an Era of Disruption”, is one of the issues that many of us are confronted with. Disruptive forces and trends are converging to create the uncertain global situation that we live in, where openness, globalisation and free trade have all come under pressure.
a. In the latest Monetary Authority of Singapore’s Survey of Professional Forecasters just released two days ago, global trade protectionism was cited by 89% of the respondents, an increase from 84% in the previous survey in June, as a key downside risk to the economy.
b. A few weeks ago at our National Day Rally, our Prime Minister Lee discussed our unprecedented external environment. PM Lee quoted Henry Kissinger, who recently told the Financial Times that “[w]e are in a very, very grave period for the world”.
An era of disruption: rebooting, not resetting
3. Globalisation and disruption are actually mutually reinforcing phenomena.
a. In the digital economy, your competitors are no longer confined to traditional geographical boundaries.
b. As the world flattens, the pace of technological advancement and knowledge transfer has intensified.
c. Digital trends such as mobile commerce, big data analytics, cloud computing and social media are now embedded in the core of business, redefining business models, customer relationships and strategic imperatives.
d. Moreover, international standards and regulatory responses are also converging. From the recent commencement of the enforcement of Europe’s General Data Protection Regulation, to the fast-developing international tax standards such as the OECD/G20’s base erosion and profit shifting project, businesses face increasing regulatory complexity and scrutiny.
4. But disruption and change are not new. In a sense, the Singapore story embodies how our country has been forced to react to disrupting events in the face of adversity, to eventually adapting and being a disruptor ourselves. In the present climate, we have continued to renew our commitment to globalisation and free trade; to innovation and enterprise; and to public-private sector cooperation.
5. As a Smart Nation, our goal is to be a leading economy powered by digital innovation.
a. The Government has rolled out 23 Industry Transformation Maps (“ITMs”). And supporting these ITMs are the Industry Digital Plans to facilitate digitalisation in every industry.
b. The Infocomm Media Development Authority has also launched the Digital Economy Framework for Action in May this year to lay down our strategic priorities in this aspect. Leveraging digitalisation, businesses in every industry can benefit from whole new growth opportunities as well as increased productivity and efficiencies.
6. Separately, the Government also seeks to encourage innovation and transformation through clear, forward-looking and smart regulation:
a. The MAS’s Financial Technology regulatory sandbox is a good example of how we have encouraged more FinTech experimentation within a well-defined space and duration with the appropriate safeguards.
b. More recently, IMDA launched new artificial intelligence (“AI”) governance and ethics initiatives, one of which is a discussion paper on AI regulation. A preliminary view put forth is that governance frameworks around AI should be technology-neutral and “light-touch”, so that AI technology can develop in a direction nor hindered or distorted by prescriptive rules that are laid down prematurely.
7. Evidently, though the era of disruption does pose a challenge, it also presents your companies with opportunities, be it through exploring nascent technologies for product innovation or market penetration, or leveraging on data analytics to transform disruptive forces into competitive advantages.
8. How can companies reboot globalisation and governance to unlock value? To reboot is to make a change in order to establish a new beginning; to boot again. Or in tech terms (since we are on the topic of disruption and technology), to reboot is to restart by loading the operating system again. This is opposed to a reset, which is a wipe-and-reinstall or an erase-and-restore of the system instead.
9. This new beginning or enhanced state that we envisage, does not require a reset where we erase past efforts and strategies. Instead, a reboot engenders a refocus, a realignment, a recalibration.
Rebooting governance: the new Code of Corporate Governance
10. On the governance front, the newly revised Code of Corporate Governance issued by MAS just last month is a timely reboot and upgrade to our governance operating system. This upgrade will help companies meet the challenges of today, with some new features and applications introduced to the ecosystem: such as the new Corporate Governance Advisory Committee and the reporting of a board diversity policy.
11. The revised Code (and the accompanying changes to the SGX Listing Rules) is the result of a year and a half’s worth of extensive deliberations and consultation with industry stakeholders. It clarifies how companies should apply the comply-or-explain regime, which focuses on key tenets of corporate governance: director independence, board composition, remuneration and stakeholder engagement.
12. To foster long-term commitment by companies, professionals, investors and regulators towards improving corporate governance standards, an industry-led Corporate Governance Advisory Committee will be established. This Committee will promote good corporate governance practices, as well as monitor international trends and recommend updates to the Code where appropriate.
13. For the first time, the Code will also require the majority of Boards to comprise non-executive directors. In addition, companies will have to disclose in their annual reports a board diversity policy and the progress made towards implementing such diversity policy. The power of board diversity and independence should not be underestimated. Diversity of expertise, geography, gender and age fosters constructive debate and prevents groupthink. These new standards, alongside others to strengthen director independence and encourage board renewal, will put your Boards in good stead to deliver wise counsel and make better decisions in these challenging times.
14. Lastly, the Code has moved beyond being prescriptive to encouraging thoughtful application of the Code, as opposed to a mere box-ticking mentality. The Code is now more concise and is meant to refocus companies’ attention on the key tenets of good corporate governance.
15. Moving forward, the Singapore Institute of Directors will update the Corporate Governance Guides for Boards in Singapore series based on the new Code, in collaboration with regulators and industry professionals. To be launched in October, this series includes six guidebooks and an eGuide to the Code of Corporate Governance. In addition, SID will launch its Listed Entity Director Programme in October. This will be a comprehensive, in-depth educational programme on the role and duties of directors of SGX-listed companies.
16. I look forward to these initiatives as well as the implementation of the new Code. This will help reboot governance and enhance board quality to produce effective, diverse and future-ready Boards that deliver strategic insights and progressive leadership.
Rebooting globalisation: opportunities remain despite headwinds
17. As for the globalisation front, our rebooting effort needs to start no further than the boardroom as well. The Board is the central nervous system of the company, the motherboard of the company’s operating system. As directors, setting the strategic direction of your companies is key to navigating today’s challenging landscape of disrupted global trade flows.
18. Although protectionism and insularism have reared their ugly heads on several trade fronts, companies can and should continue to seek new emerging opportunities.
a. Two relevant developments will in fact be discussed at the breakout sessions later this afternoon, as part of today’s conference: first, the China’s Belt and Road Initiative; and second, our regional economic integration as part of ASEAN.
i. The Belt and Road Initiative will accelerate infrastructure development across Asia. And the new Infrastructure Asia Office has been set up by Enterprise Singapore and MAS to provide a platform to support and facilitate infrastructure investments and financing.
ii. As for the region, ASEAN has the potential to become the fourth largest single market in the world by 2030, after China, the US and the EU. And as part of our ASEAN Chairmanship this year, Singapore will be pursuing an ASEAN Agreement on E-Commerce, to help businesses expand and leverage on the e-commence market potential in Southeast Asia.
b. Beyond the region and Asia, ongoing negotiations are also taking place for the 16-country Regional Comprehensive Economic Partnership that would, when concluded, be the world’s largest trade deal.
19. Companies, big or small, increasingly have to be global in the way you conduct business. Despite some headwinds, economic integration and globalisation are still important engines of global economic growth.
20. In these exciting times of rapid change, good leaders are needed to write the code and set out the blueprint for your companies. The role of corporate leadership in management and the boardroom is even more vital today. It is crucial for corporate leaders to reboot governance and globalisation; fully apprise yourselves of disruptive trends and challenges; respond and adapt quickly to them; and be bold in capitalising on opportunities.
21. With that, let me conclude, and wish you all a very fruitful conference. Thank you.