Singapore has been dubbed by various global rankings as the best and easiest place to do business in the world. It is a badge of honour that it wears with pride.

But for this to be sustained, it must be underpinned by a strong foundation of good corporate governance.

The year 2015 was to have been a cornerstone for corporate governance in Singapore, marking the time when all listed companies would have moved into the new regime of the revised Code of Corporate Governance in their reporting.

From the performance perspective, going by our nationally-published indicator – the Governance & Transparency Index (GTI) – companies collectively reached an all-time high tin 2015. Yet there are outstanding issues that have to be resolved, especially from the compliance end.

As a regulator the Singapore Exchange (SGX) has recently been extremely vigorous in levelling up many companies in their accounting practices. In particular, a comprehensive study is underway to identify areas of noncompliance, particularly where there adequate explanations are lacking.


singaporeThe final frontier in good corporate governance enforcement is to strengthen the comply-or-explain mechanism.

However, looking at the most recent data we can see that while most of the new Code guidelines have seen improvements, progress is quite inconsistent, even in areas which are required in the revised Code.

In the risk governance process, 92.5 per cent of company boards and/or audit committees conduct annual reviews and affirm the adequacy of risk management and internal control systems.

Yet, only 31.9 per cent of the companies actually disclose the key risks and how they are managed.

Just 37.6 per cent describe the process and framework for assessing how effective the company’s risk management and internal control systems are.

In the assurance process, 89.4 per cent have their CEO/CFO provide confirmation to the board on the financial records and statements and 86.9 per cent on the effectiveness of the company’s risk management and internal control system.

The other 10.6 per cent and 13.1 per cent respectively neither follow the Code nor explain their circumstances. Most of their annual reports are also generic and shallow in many other sections of the Code guidelines.

Progress is even more fragmented in the conduct of shareholder meetings.

A striking example is the poll voting issue. The revised Code recommends that companies conduct poll voting for all resolutions. Furthermore, SGX’s new listing rules in July 2013 also set out a timeline for companies to adopt poll voting and prompt disclosure of detailed voting decisions and outcomes from Aug 1 2015.

Our results show that just 55.2 per cent of the companies practise poll voting, a two-fold increase from the previous year’s 24.1 per cent, but still well only just over half of listed companies.

ThinkAloud4Moreover only 26.4 per cent of the companies actually disclose detailed voting results for each AGM agenda item, a mere 3.6-point increment from 22.8 per cent last year.

At this rate, companies need to significantly ramp up their efforts next year to meet the requirements on shareholder meetings.

Overall the data is very revealing about the state of corporate governance in Singapore.

While we would have expected all companies to move into the comply-or-explain state, it is surprising that many companies appeared to fall short. Not only did they not comply, there was also no explanation of why.

For the new Code to be effective, it is important to have an effective monitoring and enforcement system.

Beyond possibly mounting an elaborate “stick” system of punitive measures, we should also encourage a “carrot” culture where companies see that it is in their very self-interest to comply or if not, to give adequate explanations.

Good corporate governance practices in general and performances in rating systems in particular, such as the GTI, can be instruments for companies to differentiate themselves.

These can be harnessed to build trust towards different stakeholders, thus enhancing their business values. Even if improvements are made bit by bit or merely to fulfil the minimum regulatory burden, it is better than nothing at all.

The report Corporate Governance Highlights 2015: Pushing Towards a New Frontier, is a joint effort of CPA Australia and Centre for Governance, Institutions and Organisations of NUS Business School, in collaboration with The Business Times. You can read the full report by clicking here.