Sound corporate culture is a vital factor in a company's success but standards here are not as high as they should be, according to Securities Investors Association Singapore (Sias) head David Gerald.
Mr Gerald told an event yesterday that poor governance has also been linked to many scandals in the business word. "Very few organisations intentionally address their culture, which if nurtured conscientiously, can have the profound effect of propelling an organisation forward, or, if neglected, can be a huge hindrance," he said.
"There is a need to better understand how boards are addressing culture in their organisations."
Mr Gerald, speaking at the opening of the 8th Singapore Corporate Governance Week, said a recent Sias analysis of more than 200 annual reports of companies, mainly in the mid and small caps, found a lack of quality in disclosures.
For example, the first 33 pages of one firm's annual report used generic business terms that offered no information or insights into the firm's actual business. That information appeared only in the director's profile and in the key audit matters of the independent auditor's report.
And when it comes to related party transactions, firms often tend to comply with the letter of the law but not the spirit of it; they disclose only the particulars of the party but not the nature of the transaction.
"In our view, the characteristics of independent directors can dramatically improve corporate governance influences such as disclosure quality," said Mr Gerald.
"Some company boards still have independent directors who have served them for 15 to 18 years of tenure. Maybe it is time these independent directors are called up on to demonstrate to their stakeholders how far they have influenced disclosure quality."
Mr Gerald added that there is evidence that firms with good corporate governance practices have better financial performances so it is crucial to encourage firms to look beyond pursuing profit and focus on purpose, values and culture.
"These factors will help to drive behavioural change and long-term thinking which could change how a company does its business and engages with stakeholders positively on a sustainable basis and eventually improve performance over time, which is what investors and stakeholders want," he said.
The Corporate Governance Week, organised by Sias, will run until Friday, with more than 150 firms and over 700 individuals participating in various programmes.