Following an 18-month review process, the Singapore Corporate Governance Council has announced a series of recommended changes to the current corporate governance code.
The proposed changes are designed to increase transparency and attract additional investment to the nation. One of the major changes would require some companies to increase the number of independent directors on their boards; if the same individual is the company’s Chairman and Chief Executive Officer, then at least half of that company’s Board of Directors would have to be comprised of “independent directors.”
Furthermore, the recommended changes would place more stringent restrictions on who is considered “independent;” a director is not considered independent if he or she was a large shareholder, partner, executive officer, or family member of an officer or substantial shareholder.
In a statement, the Council touted the effort as being “critical to maintaining investor confidence” and to enhancing “Singapore’s reputation as a leading and trusted international financial center.”
Report & Analysis: Singapore unveils corporate governance proposals [Wall Street Journal, 14 Jun 2011]
Some analysts, however, while expressing approval for the changes, also worried that companies may face increased director fees in light of the proposals. Mak Yuen Teen, an Associate Professor with the NUS Business School, explained that numerous companies have many substantial shareholders, and therefore may face challenges in filling half a board with “independent” directors.
Report & Analysis: Panel proposes 15 changes to Code of Corporate Governance [Channel News Asia, 14 Jun 2011]
The Corporate Governance Council was established by the Monetary Authority of Singapore, which oversees corporate governance of companies listed on the Singapore Exchange. The Council is a seven-member body chaired by the CEO of Singapore Press Holdings, Alan Chan. The Code of Corporate Governance was first established in 2001, and was last revised in 2005; while compliance is not mandatory, all companies listed under the Singapore Exchange are required to detail their governance practices and give explanations for deviations from the code in their annual reports.
Report & Analysis: To promote greater accountability… [TodayOnline, 15 Jun 2011]
The committee is inviting the general public to submit their suggestions on the proposals up until July 31.