Mr David Gerald, President and CEO of Securities Investors Association of Singapore

Distinguished guests

Ladies and Gentlemen

1   Good evening. As you know, Minister Lim Hwee Hua was supposed to be here today but she was unable to attend as she had to fly to Europe to fill in for Prime Minister. She is very apologetic that she is not able to be here and requested that MAS stand in on her behalf.

2   I am very honoured to join all of you for the 11th Investor Choice Awards, which is part of the inaugural Singapore Corporate Governance Week.  First of all, may I congratulate SIAS and its partners, including the OECD, for successfully bringing together so many different stakeholders to promote good corporate governance. 

3   SIAS recently called on listed companies and professionals to pledge their support to promote good corporate governance. We are very pleased to see that 81 organisations have done so to-date.  It is good to know that so many organisations in Singapore take corporate governance seriously.

4   Singapore has done well when it comes to corporate governance.  We ranked first in Asia in the recent Asian Corporate Governance Association-CLSA survey. However, we should not rest on our laurels and be complacent.  The ACGA-CLSA report highlighted that, despite ranking first with a score of 67 percent, Singapore is always capable of doing more.

5   I am going to speak, if I may, from MAS’ perspectives. Let me talk about how Singapore can continue to have safe, efficient and well-functioning financial markets. I put to you that we need three important elements:

I. Sensible Rules
II. Effective Supervision and Enforcement
III. Partnership with all Stakeholders

Sensible Rules

6   The first is sensible rules. Rule-making should be done sensibly, and be outcome-focused. It should take into account both local and international context, a balance between costs and benefits, and the fact that you want as much transparency and clarity as you can get, but at the same time, as much flexibility as you can have, for the exercise of judgement and useful innovation.

7   MAS strives to continuously review and enhance our rules and regulations for corporate governance. In March this year, MAS consulted on proposed enhancements to the Corporate Governance Regulations and Guidelines for locally-incorporated banks and significant life insurers. The main focus of the proposals emphasizes the need for directors to have the relevant skills and commitment to oversee the operations of these financial institutions, and the important role of independent directors on the Board. MAS will publish its responses to the public consultation, and the revised regulations by the end of the year.

8   MAS also established the Corporate Governance Council earlier this year. This Council is chaired by Mr Alan Chan, Chief Executive Officer of Singapore Press Holdings Limited. Members of the Council are drawn from the business community and various stakeholder groups. The Council seeks 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.  The Council will also identify opportunities for continuing professional development of directors, and the development of practical guidance for Board committees of listed companies. The Council is currently reviewing the Singapore Code of Corporate Governance, and will submit its recommendations to MAS.

Effective Supervision and Enforcement

9   Let me turn to the second element. Having sensible rules alone is like laying the railway tracks but not monitoring how the trains operate. What we really need is to have also effective supervision and enforcement of these rules.

10   Let me talk about effective supervision. Supervision has to be proactive. We have to have close and continuous monitoring of events, trends, financial institutions, markets and market practices in order to catch problems in a timely manner, to curb excesses and prick bubbles, if necessary. Effective supervision also means that we have to be intrusive when necessary, and we are unapologetic when necessary as well.

Partnership with all Stakeholders

11   Let me turn to the third topic. All of these sensible rules and effective supervision will still not be enough if we did not have partnership with all stakeholders. Let me first talk about partnership with industry. Formal regulations and guidelines can only go so far. Industry is, and should, continue to be the first line of defence. It is important for companies to move beyond mere compliance with the Code of Corporate Governance.

12   Having good corporate governance is like practising a religion well. It is about having the ability to internalise the values, spirit and purpose behind the rules. Boards of directors and senior management have to walk it, talk it and live it. Directors need to have the appropriate skills and mindset to set the overall tone for the culture within their company. Industry groups, such as SIAS, and professional associations play important roles in promoting good corporate governance practices in the industry.

13   The other important stakeholder group is the shareholders. Shareholders ensure that companies practise good corporate governance by exercising market discipline. The recent OECD paper on Corporate Governance and the Financial Crisis highlighted that shareholders tended to be reactive rather than proactive, and seldom challenged boards in sufficient numbers to make a difference. This has to change.

14   The OECD report also highlighted the increasing trend of foreign investors in different markets.  Singapore, being an international financial hub, needs to focus on engaging not just local shareholders, but also international shareholders for effective market monitoring and discipline.

15   Companies should continue to provide as much information and in as timely a manner as possible, so that shareholders, financial analysts, financial journalists, market watchers and other important stakeholder groups can make informed and logical decisions on what to do with their capital. Stakeholders should use this information to adopt not just trading strategies, but to also have an eye to medium and long term views when considering these investments, because shareholders’ behaviour and reactions influence how CEOs and companies behave.  So you would want to have a positive reinforcing loop, rather than a negative one.

Conclusion

16   In conclusion, the Investor Choice Awards acknowledges and recognizes companies who have gone the extra mile to ensure that good corporate governance practices are embedded in their business and organizational culture. I would like to congratulate all nominees and winners for raising the corporate governance standards and contributing to Singapore’s position as a leading financial hub.

17   However, winners should not become too comfortable and complacent and let their guard down. They should be vigilant and continue to strive for higher standards of corporate governance.

18   History has a lot of notable examples of things going awry after a firm had received some accolade. Can you remember which company was named by Fortune Magazine as “America’s Most Innovative Company” for six consecutive years? The company name was Enron. The World Council for Corporate Governance awarded Satyam the “Golden Peacock” award and had to withdraw that award.

19   So again, I say to tonight’s winners, you have richly deserved your awards, you have done very well, and you should be proud of your achievements. But, the journey for good and even excellent corporate governance is never over. Raise a well deserved toast to yourselves tonight but tomorrow, get right back on the road and keep striving for a finishing line that will keep moving. That is how you are going to stay ahead of the game.

20   Thank you very much and I wish you a very pleasant evening.