Public Consultation on the Proposed Revisions to the Code of Corporate Governance
Singapore, 14 June 2011… The Corporate Governance Council (“Council”) has released a consultation paper on proposed revisions to the Code of Corporate Governance (“Code”) which applies to Singapore listed companies on a ‘comply or explain’ basis.
2 Since the last review of the Code in 2005, global events such as the 2008 financial crisis have prompted closer study of corporate governance issues around the world. The Council was established in February 2010 and is chaired by Mr Chan Heng Loon Alan, Chief Executive Officer of Singapore Press Holdings Limited. It aims to promote a high standard of corporate governance among listed companies in Singapore. This effort is critical to maintaining investor confidence, and to enhance Singapore’s reputation as a leading and trusted international financial centre. Over the last 18 months, the Council has carried out a comprehensive review of the Code, taking into account corporate governance developments in other leading jurisdictions and feedback received from stakeholders.
3 The consultation paper sets out the key proposals recommended by the Council, as summarized in the Annex. The key proposals are made in the areas of director independence, board composition, director training, multiple directorship, alternate directors, remuneration practices and disclosures, risk management, as well as shareholder rights and role.
4 Mr Alan Chan said, “Good corporate governance plays an important role in ensuring the effective functioning of Singapore’s capital markets. Whilst Singapore is well regarded for its corporate governance standards, there must be continuous efforts to encourage good corporate governance practices among Singapore listed companies.”
He added, “Taking into account that Singapore is an international market, the Council referred to corporate governance best practices in leading jurisdictions in its review. However, 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.”
5 The Council invites interested parties to submit their views and comments on the proposals made in the paper and the draft amendments to the revised Code by 31 July 2011. (Click here to view the consultation paper (155.2 KB)) (Click here to view the proposed revised Code of Corporate Governance, Appendix A (197.1 KB)) (Click here to view Appendix A1 (195.3 KB))
The Secretariat, Corporate Governance Council
c/o Monetary Authority of Singapore
10 Shenton Way
Note to Editor
The Corporate Governance Council was established by the Monetary Authority of Singapore (MAS) in February 2010 to promote a high standard of corporate governance in companies listed in Singapore, so as to maintain investors' confidence and enhance Singapore’s reputation as a leading and trusted international financial centre. Chaired by Mr Chan Heng Loon Alan, Chief Executive Officer of Singapore Press Holdings Limited, the Council also plays an advisory role to MAS, Accounting and Corporate Regulatory Authority (ACRA) and Singapore Exchange Limited (SGX) on matters relating to corporate governance, such as the Code of Corporate Governance and relevant rules and regulations pertaining to companies listed in Singapore.
Key Proposals Recommended by the Corporate Governance Council
Key Proposal 1
To include in the Code the following relationships as additional instances where a director will be deemed non-independent:
if the director is or was, in the current or any of the past three financial years, a substantial shareholder, partner, executive officer, or director of organisations to which the company or any of its related corporations made, or received significant payments or material services in the current or immediate past financial year;
if the director is a substantial shareholder or an immediate family member of a substantial shareholder of the company,
if the director is or has been directly associated1 with a substantial shareholder of the company in the current or any of the past three financial years; and
if the director has served on the Board for more than nine years from the date of his or her first election.
Key Proposal 2
To introduce in the Code a new provision that independent directors should make up at least half of the Board where (i) the Chairman and the Chief Executive Officer (“CEO”) is the same person; (ii) the Chairman and CEO are immediate family members2; (iii) the Chairman and CEO are both part of the management team; or (iv) the Chairman is not independent.
Key Proposal 3
To introduce in the Code new requirements for companies to arrange and fund training for new and existing directors, and disclose the induction, orientation and training provided to new and existing directors in its annual report.
Key Proposal 4
To introduce in the Code a new requirement for the Nominating Committee to review and make recommendations to the Board on training programmes for the Board.
Key Proposal 5
To introduce in the Code a provision that the Nominating Committee should decide if a director is able to and has been adequately carrying out his or her duties as a director, taking into consideration the director’s number of listed company board representations and other principal commitments. The Board should further determine the maximum number of listed company board representations which any director may hold, and disclose this in the company’s annual report.
Key Proposal 6
To introduce in the Code a provision that directors should not appoint alternate directors except for limited periods in exceptional circumstances.
Key Proposal 7
To include in the Code that the level and structure of remuneration should be aligned with the long-term interests and risk policies of the company. Additional guidance will also be given to companies to consider provisions allowing the company to reclaim incentive components of remuneration from directors and key management personnel in exceptional circumstances of misstatement of financial results, or of misconduct resulting in financial loss to the company.
Key Proposal 8
To introduce in the Code a provision that the Remuneration Committee should ensure that existing key relationships between the company and its appointed remuneration consultants will not affect the independence and objectivity of the remuneration consultants.
Key Proposal 9
To include in the Code additional guidance that companies should disclose more information on the link between remuneration and performance of directors, CEOs and key management personnel3.
Key Proposal 10
To introduce in the Code a provision that companies should fully disclose the remuneration of each individual director and the CEO on a named basis. Companies should disclose in aggregate the total remuneration paid to the top five key management personnel (who are not directors or the CEO).
Key Proposal 11
To introduce in the Code provisions that (i) the Board is responsible for the risk governance of the company and should determine the nature and extent of risks which the company may undertake, and that it should ensure that management maintains a sound system of risk management and internal controls; and (ii) the Board should assess appropriate means to carry out its responsibility of overseeing the company’s risk management framework and policies.
Key Proposal 12
To introduce in the Code a provision that the Board should comment on whether it has received assurance from the CEO and CFO that (i) the financial records have been properly maintained and the financial statements give a true and fair view of the company’s operations and finances; and (ii) an effective risk management and internal controls system has been put in place.
Key Proposal 13
To introduce in the Code a new principle, and accompanying guidelines, on ‘Shareholder Rights’ to guide companies in their engagement with shareholders.
Key Proposal 14
To introduce as an annexure to the Code a statement on the role of shareholders in engaging with the companies in which they invest.
Key Proposal 15
To introduce in the Code a provision that companies should put all resolutions to vote by poll and make an announcement of the detailed results showing the number of votes cast for and against each resolution and the respective percentages.
1A director will be considered "directly associated" to a substantial shareholder when the director is accustomed or under an obligation, whether formal or informal, to act in accordance with the directions, instructions or wishes of the substantial shareholder. A director will not be considered "directly associated" to a substantial shareholder by reason only of his or her appointment having been proposed by that substantial shareholder
2The term "immediate family" shall have the same meaning as currently defined in the Listing Manual of the Singapore Exchange (the "Listing Manual"), as the person's spouse, child, adopted child, step-child, brother, sister and parent
3The term "key management personnel" shall mean persons having authority and responsibility for planning, directing and controlling the activities of the company, directly or indirectly