.jpg)
Mr John Lim, Past Chairman, Singapore Institute of Directors (SID),
Professor Lawrence Loh, Director, Centre for Governance and Sustainability, NUS Business School,
Ladies and gentlemen, a very good morning to you.
Thank you for the invitation and taking time to attend this briefing.
I believe every one of us here has gone through assessments since young, be it in the form of exams in school or performance appraisals at work. Ultimately, such assessments seek to achieve two main purposes – to inform us of how we are doing and point us to areas where we can improve.
In the same vein, the ASEAN Corporate Governance Scorecard (ACGS) informs us of how companies in Singapore are performing in relation to the expected corporate governance standards and to their peers in the region. I am glad to note that in the latest assessment, Singapore companies have done well, scoring 13 points higher on average compared to the previous assessment in 2019. This is encouraging. It shows that companies are taking efforts to uplift their corporate governance standards and disclosures. I would also like to take the opportunity to congratulate the 62 entities that qualified for the ASEAN Asset Class
As we mark this achievement, the improvement in the scores is not an end in itself, but gives us the opportunity to reflect on where we can improve. We need to peel deeper beyond the scores to look at what they are telling us, including any underlying trends. So let me share briefly on how the ACGS is of relevance from three perspectives. Those of a director, an investor, and a regulator.
Board of Directors
First, the board of directors. I am sure we all agree that the central role of boards is in shaping corporate governance practices. I shall not go into detail today but suffice to say that directors have both inward-facing and outward-facing responsibilities. They serve as the key link between management and shareholders and in shaping the strategic direction of a company. It is therefore not surprising that in the ACGS methodology, “Responsibilities of the Board” has the highest weightage. Following behind as a close second is “Disclosure and Transparency”. Based on our scores, these are the two areas where there is the greatest room for improvement.
I encourage directors to take a close look and reflect on how we can close these gaps. It is not simply about complying with rules, or achieving a better score, but setting the tone for the right corporate culture in your companies. Culture has become a vital, even essential, ingredient in the ongoing success of a business. As my former MD Mr Ravi Menon shared in November last year
Now, a positive corporate culture can look different from company to company. But I would like to suggest that there are some common elements.
- The first is a culture that values feedback. This is where assessments like the ACGS come in to provide useful insights and opportunity for introspection and reflection. Boards can also as part of their internal assessment and evaluation, set objective targets, as well as assessment criteria to measure and track how things are changing over time.
- Second, is a culture that embraces diversity. We all have blind spots and may fail to notice areas that need to be changed. Sometimes, deficiencies and irregularities are accepted as the norm. And this is exacerbated by groupthink. Therefore, it is important to regularly refresh your boards – bring in new perspectives, as well as different but constructive voices. Boards that embrace such diversity take effort to expand their search for suitable directors beyond traditional means. Many do so through third-party and professional sources. One such avenue is the SID’s Board Appointment Service, which draws on its membership of over 4,000 directors.
- Third, is a culture that seeks improvement, not just at the board or organisational level, but at the level of the individual. Directors also need to continually upgrade their knowledge and skills to remain current. SID has also launched its own accreditation programme, which provides directors with structured pathways to acquire essential knowledge and skills.
- Finally, boards must also set the tone for the appropriate level of transparency and disclosure. The ACGS report has repeatedly highlighted that there has been inadequate disclosure of boards’ processes for management succession planning as well as senior management’s shareholdings. The 2022 KPMG survey
[4] commissioned by the CGAC also found that around half of listed companies still rely on boilerplate disclosures for board performance assessment, that is neither forthcoming nor meaningful. I would encourage directors to look at these gaps with a view to closing them for the benefit of the companies that you lead.
Investors
Next, what is the relevance to investors? Today’s investors are demanding better information to assess a company’s value. They no longer look at just financial performance, but more holistically at corporate governance, people management and culture.I have shared this previously, but it is worth mentioning again – a research
Apart from external assessments like the ACGS, investors are also sensitive to other forms of corporate governance indicators in the form of public commentaries, questions posed by SGX or the Securities Investors Association Singapore (SIAS), as well as feedback raised directly by shareholders. How boards and senior management engage their stakeholders, explain decisions and respond to questions will impact how investors view and value a company.
This calls for greater shareholder engagement. For instance, just last month, the CGAC put out a statement to provide guidance for shareholder engagement and touched specifically on the disclosure of dividend policies.
Regulators
Finally, from my perspective as a regulator, rules and regulations must continue to be reviewed regularly to ensure that they remain fit for purpose. In our last major review of the Code of Corporate Governance (CG Code), we made the conscious decision to make it more principle-based and less prescriptive, to allow the CG Code to have greater flexibility to adjust to changing market contexts.
MAS will also continue to collaborate with other stakeholders in shaping our corporate governance landscape. Assessments such as the ACGS and the KPMG survey provide useful feedback and data points for us to identify areas where regulations can help improve corporate governance standards. For instance, in consideration of the findings of the KPMG survey, SGX RegCo introduced the hard tenure limit of nine years for independent directors and mandatory disclosure of the specific remuneration of a listed company’s directors and CEO.
Conclusion
To conclude, the ACGS provides us with a snapshot of how we are doing as a system and shines the light on areas for improvement. This year’s results show that we have made good progress and even as we affirm this, let us work together to continue elevating corporate governance standards in our ecosystem. In my former MD’s word, let us continue to do well, do right and do good.
I wish you a fruitful discussion ahead.
Thank you.
***
[1] ASEAN Asset Class refers to companies which scored at least 97.5 marks or above out of a maximum total of 130 marks i.e., scoring 75% or higher.
[2] "Doing Well, Doing Right, Doing Good" - Opening Address by Mr Ravi Menon, Managing Director, Monetary Authority of Singapore, at SIAS Corporate Governance Conference on 6 November 2023.
[3] The CGAC is a standing industry-led body established to advocate good corporate governance practices among entities listed on the SGX.
[4] SGX Corporate Governance Code Disclosure Survey Report, June 2022.
[5] The study is being conducted by the IESE Business School. IESE Business School is the graduate business school of the University of Navarra in Spain.
[6] The ACMF is a high-level grouping of capital market regulators from all 10 ASEAN jurisdictions, namely Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand and Vietnam. Established in 2004, the primary responsibility of the ACMF is to develop a deep, liquid and integrated regional capital market.
