Time to review corporate governance code again: MAS

SINGAPORE — Four years after the last review, it may be timely to relook at the Code of Corporate Governance and one area of focus is board diversity, said Mr Ong Chong Tee, Monetary Authority of Singapore’s (MAS) deputy managing director (financial supervision).

This comes amid the evolving business landscape where other than shareholders, the interests of stakeholders such as customers, environmentalists, the general public and even employees and associates increasingly matter, he said.

“The repercussions when things go terribly wrong or even the negative publicity itself can easily destroy hard-won reputation and franchise values that ultimately erode shareholder returns,” Mr Ong said yesterday at the opening of the 7th Singapore Corporate Governance Week organised by investor rights watchdog Securities Investors Association Singapore (Sias). “Any review will need to carefully weigh the differing perspectives of different stakeholders. What is needed is a balanced and progressive code that not only serves to enhance Singapore’s corporate governance standards, but is also pragmatic and workable in practice.”

The Code of Corporate Governance was first issued in 2001 and last reviewed in 2012. Compliance with the code is not mandatory but listed companies are required under the Singapore Exchange (SGX) Listing Rules to disclose their corporate governance practices and give explanations for deviations from the code in their annual reports.

In his speech, Mr Ong singled out board diversity as an important part of a company’s “effective functioning”.

“A more diverse board is required not only out of political correctness but from good business sense. A board that has a good mix of experiences, background and technical competencies will result in more robust and thorough discussions and in decision-making by minimising blind spots or information gaps,” he said.

Separately, Mr David Gerald, president and chief executive of Sias, called on the regulators to consider asking companies to hold formal reviews of their long-time independent directors and publish reports to justify to shareholders why these directors are still considered independent after having served on the board for as long as 30 years.

He noted that the code recommends “particularly rigorous review” of the independence of any director who had served beyond nine years and requires the board to explain why such a director should be considered independent. However, few companies comply. “In many of the disclosures, the assessment of their independence … simply considered the guidelines set out in the code and deem them independent,” said Mr Gerald in his welcome address yesterday.

Mr Ong, who spoke after Mr Gerald, said the corporate governance landscape here is evolving but the direction of change “will most certainly be towards greater accountability, transparency and responsibilities of directors”. He said: “Many will agree that old standards are not enough; or not good enough. Boards’ composition, for instance, will be subject to greater scrutiny with respect to independence, competence and diversity. I believe these are overall positive trends.”