Media Releases
Published Date: 22 November 2011

Final Recommendations on the Proposed Revisions to the Code of Corporate Governance

Singapore, 22 November 2011 The Corporate Governance Council (“Council”) has submitted its recommendations on proposed revisions to the Code of Corporate Governance (“Code”) to the Monetary Authority of Singapore for consideration.

2   The Council, chaired by Mr Chan Heng Loon Alan, Chief Executive Officer of Singapore Press Holdings Limited, was established in February 2010 to promote a high standard of corporate governance among listed companies in Singapore. Over the last 21 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   Along with the submission of its recommendations, the Council has today also released a response paper to feedback received from the public consultation conducted between June and July 2011. A total of 75 responses were received. Most respondents were supportive of the Council’s proposed revisions. The response paper sets out the feedback received on the key proposals, the Council’s response to the feedback, and the final proposals.

4   Having carefully considered the feedback received, the Council has finalised its recommendations on the revised Code. The final proposals are made in areas of director independence, board composition, director training, multiple directorships, alternate directors, remuneration practices and disclosures, risk management, as well as shareholder rights and roles. In addition, the Council has recommended that a transition period be introduced to facilitate compliance with the revised Code.

5   Mr Chan said, “The Council would like to thank all respondents for their feedback on the proposed revisions to the Code. Strong corporate governance is the cornerstone of well-functioning capital markets. Upholding high corporate governance standards requires the continuous efforts of all stakeholders including the authorities, industry, and shareholders. In this respect, the Council is encouraged by the level of interest shown by various stakeholders, as evident from the amount of feedback that the Council received during the consultation.”

6   Mr Chan added, “While respondents were generally supportive of the Council’s recommendations, there were divided views on some of the recommendations. The Council has carefully weighed the different perspectives put forward, and revised its recommendations in some of the areas. We believe that the final set of recommendations, incorporating industry feedback, achieves the Council’s objective of presenting a balanced package that not only serves to enhance Singapore’s corporate governance standards, but is also pragmatic and workable in practice.”

7   Please refer to Annex to view the Council’s recommendations to the MAS. (Click here to view the response to feedback received from the public consultation (686.7 KB))(Click here to view the proposed revised Code of Corporate Governance (146.8 KB))

The Secretariat, Corporate Governance Council
c/o Monetary Authority of Singapore




Director Independence

Relationship with Substantial Shareholders

1   The Council recommends tightening the definition of director independence such that a director who is a substantial shareholder1, or an immediate family member of a substantial shareholder, or is/was directly associated with a substantial shareholder in the current or any of the past 3 years would be considered non-independent.

9 Year Period for Board Service

2   The Council recommends that the independence of any director who had served on the Board beyond nine years from the date of his appointment should be subject to particularly rigorous review, and the Board should explain why any such director should be considered independent.

Relationships with External Organisations

3   The Council recommends to include, as a factor affecting a director’s independence, whether the director, in the current or immediate past financial year, is or was, a substantial shareholder, partner, executive officer, or director of any organisation to/from which the company or its subsidiaries made/receive significant payments or material services2 in the current or immediate past financial year.

Board Composition

4   The Council recommends that independent directors should make up at least half of the Board where the Chairman and Chief Executive Officer (“CEO”) (i) is the same person; (ii) are immediate family members3; or (iii) are part of the same management team; or (iv) if the Chairman is not independent.

Director Training

5   The Council recommends specifying that companies should be responsible for arranging and funding the training of directors, and the Board should disclose in the annual report the induction, orientation and training provided to new and existing directors. In addition, the Council also recommends specifying that the Nominating Committee make recommendations to the Board on matters relating to the review of training and professional development programs for the Board.

Multiple Directorships

6   The Council recommends for the Code to expressly state that the Nominating Committee should decide if a director is able to and has been adequately carrying out his duties as a director, taking into consideration the director’s number of listed company board representations and other principal commitments4. The Council also recommends that the Board should determine the maximum number of listed company board representations which any director may hold, and disclose the number in the annual report.

Alternate Directors

7   The Council recommends that the Board should generally avoid approving the appointment of alternate directors except for limited periods in exceptional cases such as when a director has a medical emergency, and the Nominating Committee and the Board should ensure that an alternate director to an independent director should similarly qualify as an independent director.

Remuneration Practices and Disclosure

Alignment of Remuneration with Long Term Interest and Risk Policies of Companies

8   The Council recommends that the level and structure of remuneration should be aligned with the long-term interest and risk policies of the company, and should be appropriate to attract, retain and motivate (a) directors to provide good stewardship of the company, and (b) key management personnel to successfully manage the company.

Reclamation of Incentive Components of Remuneration

9   The Council encourages companies to consider the use of contractual provisions to allow 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.

Relationship with Appointed Remuneration Consultant

10   The Council recommends that the Remuneration Committee should ensure that existing relationships, if any, between the company and its appointed remuneration consultants will not affect the independence and objectivity of the remuneration consultants.

Disclosure on Link between Remuneration and Performance

11   The Council recommends that for greater transparency, companies should disclose more information on the link between remuneration paid to the executive directors and key management personnel, and performance.

Enhanced Disclosure of Remuneration

12   The Council recommends that the company should fully disclose the remuneration of each individual director and the CEO on a named basis. In addition to the existing guideline on the naming and disclosure of at least the top five key management staff (who are not directors or the CEO) in bands of S$250,000, the Council recommends that the company should disclose in aggregate the total remuneration paid to the top five key management personnel (who are not directors or the CEO).

Risk Management

Board Oversight on Risk Management

13   The Council recommends that the Code specifies that the Board is responsible for the governance of risk and should determine the nature and extent of significant risks which the company is willing to take in achieving its strategic objectives. The Board should ensure that the management maintains a sound system of risk management and internal controls. The Board should also assess appropriate means to assist it in carrying out its responsibility of overseeing the company’s risk management framework and policies.

Assurance from the CEO and CFO

14   The Council recommends that the Board should comment on whether it has received assurance from the CEO and CFO (i) that 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) regarding the effectiveness of the company’s risk management and internal control systems.

Shareholder Rights and Roles

15   The Council recommends introducing a new principle and accompanying guidelines on shareholder rights to guide companies in their engagement with shareholders. The Council also recommends introducing, as an annexure to the Code, a statement on the role of shareholders in engaging with the companies in which they invest.

Poll Voting at General Meetings of Shareholders

16   The Council recommends 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.

1 Substantial shareholders refer to those with 5% or more voting shares in the company, as defined in the Companies Act.
2 Payments aggregated over any financial year in excess of S$200,000 should be deemed significant.
3 Immediate family members refer to the person’s spouse, child, adopted child, step child, brother, sister and parent as defined in the Listing manual of the Singapore Exchange.
4 Principal commitments shall include all commitments which involve significant time commitment such as full-time occupation, consultancy work, committee work, non-listed company board representations and directorships and involvement in non-profit organisations. Where a director sits on the board of non-active subsidiaries, those appointments should not normally be considered principal commitments.