Parliamentary Replies
Published Date: 26 July 2021

Reply to Parliamentary Question on Code of Corporate Governance




Date: For Parliament Sitting on 26 July 2021

Name and Constituency of Member of Parliament

Mr Chua Kheng Wee Louis, MP, Sengkang GRC


To ask the Prime Minister with regard to the Code of Corporate Governance (a) in the past five years, what is the total number and percentage of companies that fail to comply with (i) Provision 8.1(a) and (ii) Provision 8.1(b); and (b) whether MAS has plans to mandate compliance and what are its considerations for doing so and not doing so.

Answer by Mr Tharman Shanmugaratnam, Senior Minister and Minister in charge of MAS:

1     Let me first explain how the Code of Corporate Governance is designed to be applied on listed companies and Provision 8.1 of the Code. 

2     The Code comprises two layers – Principles and Provisions. Principles set out the characteristics of good corporate governance and compliance is mandatory. The relevant Principle here is providing transparency on the remuneration of directors and key management personnel of a company.

3     Provisions in the Code are more specific and operate on a “comply or explain” basis to support companies’ compliance with the Principles. Provision 8.1 of the Code states that companies should disclose in their annual reports, the company’s policy and criteria for setting remuneration. Specifically, companies should disclose the amount and breakdown of remuneration of each individual director and the CEO. They should also disclose the remuneration of at least the top five key management personnel (who are not directors or the CEO) in bands no wider than S$250,000, and the total remuneration paid to these key management personnel together.

4     Companies may either comply with the Provisions or explain how their practices, which may vary from the Provisions, still comply with the Principles. This “comply or explain” approach recognises the diversity of listed companies, and provides them flexibility to adapt the Provisions to suit their business models or commercial circumstances. For example, while one Provision in the Code asks for a Board Risk Management Committee to be set up to specifically oversee risk management and internal controls, some companies with smaller boards have found it more efficient to have a single committee covering both risk management matters as well as the duties of an Audit Committee.

5     SGX reviews the annual report disclosures of listed companies. Companies may be issued a public query where there is no disclosure made for deviation from a Provision or if the disclosure is not satisfactory.  The companies’ responses to such queries can be accessed by the public on SGX’s website. Apart from SGX, if shareholders or the investing public find the disclosures or explanations offered by listed companies unsatisfactory, they can ask these companies for further explanation.

6     Based on the Singapore Board of Directors Survey 2019 jointly conducted by the Singapore Institute of Directors and SGX RegCo, in respect of Provisions 8.1(a) and (b), 46% of the listed companies surveyed disclosed remuneration of their CEO and each individual director on a named basis, and 72% of the companies disclosed the remuneration of their top five key management personnel in bands of $250,000 respectively. Companies which did not comply with these Provisions cited reasons to do with confidentiality of an individual’s remuneration, potential poaching by competitors, internal comparisons affecting staff morale, or upward pressure on remuneration due to potential comparisons.  

7     The Corporate Governance Advisory Committee, an industry-led body set up to advocate good corporate governance practices, will undertake a survey later this year to assess the compliance of SGX-listed companies with the Code, as well as the quality of corporate governance-related disclosures. Remuneration-related disclosures will be one of the focus areas. The Monetary Authority of Singapore and SGX RegCo will review the survey findings and CGAC’s recommendations.