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PR Newswire
15-06-2011, 10:56 PM
This has coverage in the FT & WSJ too. Everyone seems positive on the changes. IMO, it doesn't address the elephant in the room, that the single largest source of shareholder governance issues comes from foreign listings where there is no real legal recourse, although nobody else seems to have solved that.
Top Print Edition Stories
Published June 15, 2011
Cracking the code on corporate governance
Revamp proposals touch on multiple directorships, remuneration disclosures and definition of IDs
By MICHELLE QUAH
(SINGAPORE) Much-awaited plans to revamp Singapore's Code of Corporate Governance were announced yesterday and, judging by initial reactions, they do not disappoint.
Singapore's Corporate Governance Council (CGC) - appointed by the Monetary Authority of Singapore (MAS) in February last year - has proposed bold changes to the existing corporate best practice guide, last reviewed in 2005.
Among the key changes are a stricter definition of independence for independent directors (to now include independence from substantial shareholders) and greater disclosure of board and executive remuneration.
Also gaining much approval was the council's decision to include a section on shareholder rights and responsibilities, which corporate governance advocates say would help investors realise they have a part to play in good governance.
Jamie Allen, secretary-general of the Asian Corporate Governance Association (ACGA), said: 'We consider this (consultation paper) a positive and encouraging step forward - it answers a lot of the issues we've raised, such as the definition of independence. This will be welcomed by the international shareholder community.'
NUS associate professor Mak Yuen Teen said: 'I think the proposed changes are very positive in terms of raising corporate governance standards and they will bring our Code largely in line with international standards. However, there are generally more corporate governance requirements which are incorporated in listing rules or even regulations in other markets.'
The proposed changes are set out in a consultation paper available on the MAS website (www.mas.gov.sg). The public will have until July 31 to submit their feedback on these suggestions, after which the CGC will submit a report to the MAS, which will decide by year's end on the final Code that it will adopt.
Alan Chan, chairman of the CGC and CEO of Singapore Press Holdings, said: 'The council recognises the need for corporate governance practices to be adopted on a contextual basis, and has sought to adapt rather than replicate relevant practices of other jurisdictions. The proposed set of recommendations is a balanced package that not only serves to enhance Singapore's corporate governance standards, but is also pragmatic and workable in practice.'
The treatment of director independence was given quite an overhaul, starting with a tighter definition of what makes an independent director. The council suggests that a director be deemed non-independent if he is or has been directly associated with a substantial shareholder of the company in the current or any of the past three financial years.
The CGC is also proposing that a director be deemed non-independent if he has served on the board for more than nine years - the first time a tenure for an independent director has been mentioned here.
The council has also suggested that the board should identify, in the company's annual report, each director it considers to be independent.
As for the thorny issue of multiple directorships, the CGC has decided not to spell out an 'ideal' number of directorships any one director should have - unlike Hong Kong's recent suggestion to have a limit.
Singapore's CGC is instead suggesting that the nominating committee decide if a director can carry out his duties, bearing in mind his commitments - as time requirements for different directorships could vary greatly and that a director may have other commitments which are not directorships.
It says that the board should decide the maximum number of listed company board representations which any director may hold, and disclose this in the company's annual report.
David Smith, head, Asia (ex-Japan) research at ISS, said: 'This is a compromise. Time will tell how this will be implemented, and what the figure will be for various companies. Companies should probably be required to disclose why they felt that such a figure was appropriate . . . Nonetheless, the proposal forces companies to at least think about the issue.'
The council also suggested that directors should avoid appointing alternate directors - except for limited periods in exceptional cases - on the basis that alternate directors may not be as well-prepared nor able to perform as well as full-time directors.
Remuneration policies were also given much attention by the council. Among other things, the CGC suggests that companies disclose the exact remuneration earned by each individual director and the CEO on a named basis, instead of within bands of $250,000 in the current Code.
A proposal that received much approval from corporate governance advocates was the council's decision to devote an entire section to shareholders' rights and responsibilities.
ISS's Mr Smith said: 'This is one step towards recognising that corporate governance is not a one-way street - it takes two hands to clap. Shareholders need to communicate effectively with the companies in which they invest.'
Prof Mak said that there must be adequate monitoring and enforcement of the 'comply or explain' requirement of the Code.
ACGA's Mr Allen added: 'Asia now needs to move into a more substantive phase over the next 10 years, having spent the last 10 years building up its corporate governance framework.'
Top Print Edition Stories
Published June 15, 2011
Cracking the code on corporate governance
Revamp proposals touch on multiple directorships, remuneration disclosures and definition of IDs
By MICHELLE QUAH
(SINGAPORE) Much-awaited plans to revamp Singapore's Code of Corporate Governance were announced yesterday and, judging by initial reactions, they do not disappoint.
Singapore's Corporate Governance Council (CGC) - appointed by the Monetary Authority of Singapore (MAS) in February last year - has proposed bold changes to the existing corporate best practice guide, last reviewed in 2005.
Among the key changes are a stricter definition of independence for independent directors (to now include independence from substantial shareholders) and greater disclosure of board and executive remuneration.
Also gaining much approval was the council's decision to include a section on shareholder rights and responsibilities, which corporate governance advocates say would help investors realise they have a part to play in good governance.
Jamie Allen, secretary-general of the Asian Corporate Governance Association (ACGA), said: 'We consider this (consultation paper) a positive and encouraging step forward - it answers a lot of the issues we've raised, such as the definition of independence. This will be welcomed by the international shareholder community.'
NUS associate professor Mak Yuen Teen said: 'I think the proposed changes are very positive in terms of raising corporate governance standards and they will bring our Code largely in line with international standards. However, there are generally more corporate governance requirements which are incorporated in listing rules or even regulations in other markets.'
The proposed changes are set out in a consultation paper available on the MAS website (www.mas.gov.sg). The public will have until July 31 to submit their feedback on these suggestions, after which the CGC will submit a report to the MAS, which will decide by year's end on the final Code that it will adopt.
Alan Chan, chairman of the CGC and CEO of Singapore Press Holdings, said: 'The council recognises the need for corporate governance practices to be adopted on a contextual basis, and has sought to adapt rather than replicate relevant practices of other jurisdictions. The proposed set of recommendations is a balanced package that not only serves to enhance Singapore's corporate governance standards, but is also pragmatic and workable in practice.'
The treatment of director independence was given quite an overhaul, starting with a tighter definition of what makes an independent director. The council suggests that a director be deemed non-independent if he is or has been directly associated with a substantial shareholder of the company in the current or any of the past three financial years.
The CGC is also proposing that a director be deemed non-independent if he has served on the board for more than nine years - the first time a tenure for an independent director has been mentioned here.
The council has also suggested that the board should identify, in the company's annual report, each director it considers to be independent.
As for the thorny issue of multiple directorships, the CGC has decided not to spell out an 'ideal' number of directorships any one director should have - unlike Hong Kong's recent suggestion to have a limit.
Singapore's CGC is instead suggesting that the nominating committee decide if a director can carry out his duties, bearing in mind his commitments - as time requirements for different directorships could vary greatly and that a director may have other commitments which are not directorships.
It says that the board should decide the maximum number of listed company board representations which any director may hold, and disclose this in the company's annual report.
David Smith, head, Asia (ex-Japan) research at ISS, said: 'This is a compromise. Time will tell how this will be implemented, and what the figure will be for various companies. Companies should probably be required to disclose why they felt that such a figure was appropriate . . . Nonetheless, the proposal forces companies to at least think about the issue.'
The council also suggested that directors should avoid appointing alternate directors - except for limited periods in exceptional cases - on the basis that alternate directors may not be as well-prepared nor able to perform as well as full-time directors.
Remuneration policies were also given much attention by the council. Among other things, the CGC suggests that companies disclose the exact remuneration earned by each individual director and the CEO on a named basis, instead of within bands of $250,000 in the current Code.
A proposal that received much approval from corporate governance advocates was the council's decision to devote an entire section to shareholders' rights and responsibilities.
ISS's Mr Smith said: 'This is one step towards recognising that corporate governance is not a one-way street - it takes two hands to clap. Shareholders need to communicate effectively with the companies in which they invest.'
Prof Mak said that there must be adequate monitoring and enforcement of the 'comply or explain' requirement of the Code.
ACGA's Mr Allen added: 'Asia now needs to move into a more substantive phase over the next 10 years, having spent the last 10 years building up its corporate governance framework.'