Code of Corporate Governance may need review: Regulator

MAS official also stresses role of boards in maintaining integrity

Mr Ong Chong Tee of the MAS says good governance driven by boards must feature as an important front-line defence.
Mr Ong Chong Tee of the MAS says good governance driven by boards must feature as an important front-line defence.

It may be time for Singapore to review its Code of Corporate Governance, according to a senior regulator yesterday.

Mr Ong Chong Tee, deputy managing director of financial supervision at the Monetary Authority of Singapore (MAS), spoke about board diversity and the need for directors to represent a good mix of experiences and technical competencies to minimise "blind spots" or "information gaps".

He then asked in a speech at the Singapore Corporate Governance Week: "Is it time for us to review our Corporate Governance Code? It may indeed be timely to do so since the last review was back in 2012."

The code is a set of best practice recommendations issued by the MAS, first implemented in 2001 and applied to companies listed on the Singapore Exchange (SGX).

It sets out the principles for matters such as remuneration, accountability and audit, as well as meaningful disclosures.

Mr Ong said a proactive board of directors must be at the frontline of securing the integrity of Singapore's financial system.

Although the MAS does crack down when regulatory lapses and control failures occur, it is "neither possible nor realistic for the MAS to detect and prevent all bad behaviours or criminal acts", he said.

"This is why good governance driven by boards must feature as an important frontline defence."

Mr Ong also said the MAS would resist calls for now to weigh in on the debate over whether to allow dual-class shares for SGX-listed companies. This is to avoid prematurely stifling the collective wisdom, he added.

"The SGX is still considering the possible safeguards so as to satisfy itself that it can meet any regulatory concerns; and should it proceed, will issue a public consultation document on the details."

Mr Ong also stressed the need for high-quality corporate disclosures. Though he did not name names, he alluded to "recent allegations of accounting irregularities against a few commodity-related or energy resources firms".

Mr Ong noted that company disclosures were generally adequate, but had room for improvement.

He said: "One area, in my view, is for companies to provide better disclosures on remuneration, as well as the link between remuneration and performance. Another area is on more clarity with regard to diversity policies and the company's plans on them.

"For market discipline to work, directors should embrace a culture of quality disclosure and to be forthcoming in engaging investors in a timely fashion."

In a separate speech, Securities Investors Association Singapore (Sias) president David Gerald raised concern over the need for more rigorous review of long-time directors on company boards.

He noted one study that found several companies with lead independent directors who had served on the boards for periods from 24 to 30 years.

Mr Gerald called on regulators to consider requiring boards to conduct independent reviews to justify the independence of such directors, and have these reports made public.

The five-day event at the Mandarin Hotel, which ends on Friday, is organised by Sias and has attracted more than 600 individuals from 150 companies.

A version of this article appeared in the print edition of The Straits Times on September 27, 2016, with the headline 'Code of Corporate Governance may need review: Regulator'. Print Edition | Subscribe