Singapore Corporate Governance

Provision 9.2 says “The Board requires and discloses in the company’s annual report that it has received assurance from:  a)     the CEO and the Chief Financial Officer (“CFO”) that the financial records have been properly maintained and the financial statements give a true and fair view of the company's operations and finances; and b)     the CEO and other key management personnel who are re...

Principle 10 might just be the shortest one ever  “The Board has an Audit Committee ("AC") which discharges its duties objectively.” This is noteworthy as the Audit Committee is the only one that has a Principle specifically requiring its formation. Why is it so important? Show Notes 1) Download the Singapore Code of Corporate Governance below https://www.mas.gov.sg/-/media/mas/news-and-...

Provision 10.1 is so long, it will be broken into this podcast and the next.  The first part of it reads “ The duties of the AC include: (a)                      reviewing the significant financial reporting issues and judgements so as to ensure the integrity of the financial statements of the company and any announcements relating to the company's financial performance; (b)                 ...

The is the second part of Provision 10.1, which continues  “The duties of the AC include: (a)                      making recommendations to the Board on: (i) the proposals to the shareholders on the appointment and removal of external auditors; and (ii) the remuneration and terms of engagement of the external auditors; (b)                      reviewing the adequacy, effectiveness, independence,...

Provision 10.2, discusses AC composition by saying “The AC comprises at least three directors, all of whom are non-executive and the majority of whom, including the AC Chairman, are independent. At least two members, including the AC Chairman, have recent and relevant accounting or related financial management expertise or experience.” Often, people are confused and think that all on the AC have t...

Principle 8 says “The company is transparent on its remuneration policies, level and mix of remuneration, the procedure for setting remuneration, and the relationships between remuneration, performance and value creation.” What does it mean to disclose the relationships between remuneration, performance and value creation? Show Notes 1) Download the Singapore Code of Corporate Governance below htt...

Provision 8.1 goes deeper into disclosures “The company discloses in its annual report the policy and criteria for setting remuneration, as well as names, amounts and breakdown of remuneration of:  each individual director and the CEO; and  at least the top five key management personnel (who are not directors or the CEO) in bands no wider than S$250,000 and in aggregate the total remuneration paid...

It is interesting that on his journey to becoming the world’s richest man, the large pay package of Elon Musk was the object of a lawsuit. A shareholder claimed that the Tesla Board did not independently craft the remuneration package but was unduly influenced by Elon Musk.  This debate on independence leads us nicely to Provision 6.2 which says “The RC comprises at least three directors. All memb...

Provision 6.3 says “The RC considers all aspects of remuneration, including termination terms, to ensure they are fair.” But what exactly is fair? How can we determine it? Show Notes 1) Download the Singapore Code of Corporate Governance below https://www.mas.gov.sg/-/media/mas/news-and-publications/code-of-corporate-governance-6-aug-2018-revised-11-jan-2023.pdf 2) Join the preparatory course for...

We may already find it predictable, there usually is a closing provision that addresses disclosure requirements.  Provision 6.4 says “The company discloses the engagement of any remuneration consultants and their independence in the company’s annual report” How are local companies doing in such disclosures? Show Notes 1) Download the Singapore Code of Corporate Governance below https://www.mas.gov...

Principle 7 lays it out, “The level and structure of remuneration of the Board and key management personnel are appropriate and proportionate to the sustained performance and value creation of the company, taking into account the strategic objectives of the company.” What do the key terms in this mean? How do the Provisions build on it? Show Notes 1) Download the Singapore Code of Corporate Govern...

Provision 7.1 goes “A significant and appropriate proportion of executive directors’ and key management personnel’s remuneration is structured so as to link rewards to corporate and individual performance. Performance-related remuneration is aligned with the interests of shareholders and other stakeholders and promotes the long-term success of the company” How do we link rewards to individual perf...

While the spotlight is usually on Executive Director remuneration, Provision 7.2 takes a while to look at someone else “The remuneration of non-executive directors is appropriate to the level of contribution, taking into account factors such as effort, time spent, and responsibilities.” Should NEDs be compensated with shares? What are the benefits and risks to so doing? Show Notes 1) Download the...

Provision 7.3 reminds us of the goal of remuneration  “Remuneration is appropriate to attract, retain and motivate the directors to provide good stewardship of the company// and key management personnel to successfully manage the company for the long term." How did Tesla really adopt the logic in this, when creating a pay package for Elon Musk?  Show Notes 1) Download the Singapore Code of Co...

Provision 5.1 states “The NC recommends for the Board’s approval the objective performance criteria and process for the evaluation of the effectiveness of the Board as a whole, and of each board committee separately, as well as the contribution by the Chairman and each individual director to the Board.” How is the NC to come up with objective performance criteria to evaluate the Board? Again, how...

Provision 5.2 ends this section with  “The company discloses in its annual report how the assessments of the Board, its board committees and each director have been conducted, including the identity of any external facilitator and its connection, if any, with the company or any of its directors. This is all about disclosure, some firms inspire confidence with their disclosures, while others inspir...

Principle 6 touches on a controversial subject - money. “The Board has a formal and transparent procedure for developing policies on director and executive remuneration, and for fixing the remuneration packages of individual directors and key management personnel. No director is involved in deciding his or her own remuneration" How can the Board ensure its remuneration policies are defensible...

Provision 6.1 states “The Board establishes a Remuneration Committee ("RC") to review and make recommendations to the Board on: i) a framework of remuneration for the Board and key management personnel; and ii) the specific remuneration packages for each director as well as for the key management personnel." What is a framework of remuneration? How does it cover the short-term and t...

Principle 5 is a weighty one, “The Board undertakes a formal annual assessment of its effectiveness as a whole, and that of each of its board committees and individual directors.” But wouldn't the Board be assessing itself, making it a clear self-review threat? We discuss that in this episode! Show Notes 1) Download the Singapore Code of Corporate Governance below https://www.mas.gov.sg/-/med...

Provision 3.1. touches on what is considered best practice in many countries, it says “The Chairman and the Chief Executive Officer (“CEO”) are separate persons to ensure an appropriate balance of power, increased accountability, and greater capacity of the Board for independent decision making.” How is it possible to have two separate persons as CEO and Chairman, yet not be compliant with the spi...

Provision 3.2 is a short one “The Board establishes and sets out in writing the division of responsibilities between the Chairman and the CEO.” Learn how some firms even set out "Authority Grids" to clearly demarcate the responsibilities of the Chairman and CEO. Show Notes 1) Download the Singapore Code of Corporate Governance below https://www.mas.gov.sg/-/media/mas/news-and-publication...

Provision 3.3 goes on for a while “The Board has a lead independent director to provide leadership in situations where the Chairman is conflicted, and especially when the Chairman is not independent. The lead independent director is available to shareholders where they have concerns and for which contact through the normal channels of communication with the Chairman or Management are inappropriate...

Principle 4 is a very fundamental one, it says “ The Board has a formal and transparent process for the appointment and re- appointment of directors, taking into account the need for progressive renewal of the Board.” Sunshine is the best antiseptic, with transparency leading to better appointments.  If the Board is well-balanced and competent, might replacements still be needed? Why fix what isn&...

Provision 4.1 is the longest clause, ever: The      Board  establishes a Nominating       Committee      (“NC”)  to make recommendations to the Board on relevant matters relating to: 1)    the review of succession plans for directors, in particular the appointment and/or replacement of the Chairman, the CEO and key management personnel 2)    the process and criteria for evaluation of the performan...

Provision 4.2 discusses the composition of the Nominating Committee, saying “The NC comprises at least three directors, the majority of whom, including the NC Chairman, are independent. The lead independent director, if any, is a member of the NC.” Can an Executive Director be on the NC? What if we need him for industry knowledge and input? Show Notes 1) Download the Singapore Code of Corporate Go...