To ask the Senior Minister whether the Government has any plans to promote greater confidence in our market by introducing greater internal controls in public listed companies to check the powers of financial officers to single-handedly make big payments over a period of years, causing huge losses to their companies.
Note: The above Question was originally directed to Prime Minister and Minister for Finance (vide Q. *467 in Notice Paper No. 305 of 2007)
Mr Tharman Shanmugaratnam, Minister for Education and Finance:
Mr Chiam has asked if the government intends to introduce more rules governing internal controls in public listed companies.
The Companies Act sets out the minimum standards required of all companies registered in Singapore. Section 199 of the Act specifically requires a public company, whether listed or unlisted, to maintain internal accounting controls which provide reasonable assurance that assets are safeguarded against loss resulting from unauthorised use or disposition, and that transactions are properly authorized and recorded as necessary to maintain accountability of assets.
In addition to the Companies Act, the SGX Listing Manual requires listed companies in Singapore to comply with the Code of Corporate Governance, or disclose and explain any deviations. The Code places responsibility on the Board of a company to ensure that the Management maintains a sound system of internal controls to safeguard shareholders’ investments and the company’s assets. Further, the Code recommends that the audit committee – the majority of which, including the Chairman, should be independent – review the adequacy of the company’s internal controls and the Board comment on the adequacy of the internal controls in the company’s annual reports.
This approach allows a listed company and its Board the flexibility to take into account the specific circumstances of its business operations when designing its system of internal controls.
Generally, the Companies Act requirements and the best practice guidance in the Code for listed companies set an appropriate framework for proper internal controls by companies in Singapore. The Monetary Authority of Singapore (MAS), the Singapore Exchange (SGX) and the Accounting and Corporate Regulatory Authority (ACRA) will continue to keep the legislation and best practice codes up to date through regular refinement, so that they stay relevant in a changing environment. But imposing additional or more detailed rules on companies will not prevent corporate mishaps.
We also have to go beyond compliance with minimum regulatory standards. The boards and managements of companies should look for practical ways to improve their risk management and governance practices, especially because their companies operate in an increasingly complex environment.
The government will support industry efforts to improve corporate governance and explore practical initiatives to help companies improve their internal practices. For instance, MAS, ACRA and SGX recently established an industry-led Audit Committee Guidance Committee. This committee has been tasked with developing practical guidance to assist audit committees of listed companies to better understand their roles and responsibilities, and to enhance their effectiveness.