Why It Matters

Code of conduct review is timely

Now and then, a scandal erupts in corporate Singapore and the usual finger-wagging verdict is that shareholders would have been spared some grief if the company's leadership had taken corporate governance more seriously.

Accountability and transparency are basic principles of corporate governance, and yet many directors of companies listed here struggle to embody this. Instead, boardrooms are perceived to be old boys' clubs where directors never rise above a rubber-stamp role.

It does not help that Singapore's Code of Corporate Governance is a weepingly long document last revised in 2012. So, the latest review is timely.

When the revised code of conduct is launched in the second half of this year, the word count will be halved. And, if suggested changes are taken up, the code will also be more clear-cut.

The meatiest parts of the proposed revisions are focused on strengthening board quality and director independence.

Listed companies will need to have independent directors comprise one-third of their boards, or half in the case that the chairman is not independent.

In Singapore, where many listed companies have concentrated ownership structures, minority oppression is a recurring theme. So, independent directors have a duty to represent minority interests in special situations, such as when the company owner wants to buy out minorities and take his firm private.

To widen the search for director candidates, another rule will require companies to justify the independence of long-serving independent directors.

The Singapore Exchange wants feedback on whether there should be a nine-year hard limit on an independent director's tenure, or if the appointment should be put to a vote by all shareholders, and then to another vote by all non-controlling shareholders.

Nothing is set in stone yet, but, if suggestions like these are eventually adopted, it would be good news for the state of corporate governance here.

A version of this article appeared in the print edition of The Straits Times on January 19, 2018, with the headline 'Code of conduct review is timely'. Print Edition | Subscribe