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Corporate governance in Singapore

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Dimitar Dilov

on 16 February 2014

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Transcript of Corporate governance in Singapore

Singapore has the
most advanced Corporate governance
(CG) culture framework and practices
among peers in Asia
.
Companies in Singapore follow mix of
mandatory CG rules
such as: Companies Act, Securities & Future Act ,and the listing riles of the Singapore Stock Exchange (SGX); and their
own, internal, CG rules
.
SGX, being both a regulator and listing body is considered not fully effective in its CG role due to inherent conflict of interest
The Monetary Authority of Singapore issues the Code of CG applied for stock listed companies in "
comply-or-explain"
regime.
Listed companies must report deviations from Code of CG
Singapore CG
framework was under review in 2013
. The results will come in 2014.
Singapore based companies adopted
single-tier board
of directors which is responsible for the supervision of the management.
The exact
role of the chairman and the board is defined by internal memorandums
, whose responsibilities might include:
setting strategic aims
ensuring resources are in place to meet the aims
establishing a proper framework for prudent control
reviewing management performance
ensuring all stakeholders are settled proficiently
The code of CG promotes establishment of different committees established by
independent directors to asses management performance
(e.g. remuneration committee, audit committee).
Non-executive board members must be independent
with decisions and board must not be dominated by an individual or groups
Corporate governance in Singapore
Framework, specifics and critical issues
Group project

Corporate leadership
Board Structure, Management and Members in Singapore
Being independent director in Singapore
Materials to read:
General framework of CG in Singapore
Web site with useful information:

http://statutes.agc.gov.sg/aol/home.w3p
Shareholders influence
The following actions require
shareholders attention
for all companies:
disposing the whole or partially
(above certain levels)
company's assets
granting management power
to increase capital (e.g. issuing shares)
granting or improving directors emoluments
For stock listed companies additional restrictions to directors authority are applied:

changes in capital
via issuance of stock options or via share intensives

Like other countries
shareholder activism
is an issue in Singapore. Shareholder activism is a process via which
shareholders try to put pressure on management
to either profit or to improve corporate and social responsibility of the company by calling for general meeting, replacing directors, revising directors' activity or using proxy.
Issues with CG in Singapore
Code of Corporate Governance (effective with the year ended 31 December 2013):

http://www.mas.gov.sg/~/media/resource/legislation_guidelines/banks/guidelines/Corporate Governance Guidelines_2013.p

The role of independent director (ID) is
still a gray area in Singapore
as far as: For example, it is not clear which stakeholders, or only shareholders, ID should protect.
Appointment of IDs is done by the shareholders
, and as per state regulations max time for which an independent directors can stay in same company is nine years.
Remuneration packages depends on the contribution.
ID benefits are reported in companies' annual reports
All directors should submit themselves for
re-appointment and remuneration on a certain interval
(usually at least every three years)
As per John Lim (Chairman of Singapore Institute of Directors) "
the country's CG codes tend to reflect ideal situation and not what is happening on the market
".
Corporate responsibility
, especially with family owned businesses
Risk management
(framework for effective and prudent internal risk control) responsibilities for board are not clear in the Code of CG. These responsibilities must be clarified via internal code of conducts.

A nominee can vote for more than one shareholder
, as well as a person can be ID for more than one company. Here it is not clear how conflict of interest and full dedication are assured.
After a company being listed there are
requirements by the stock exchange to hire a corporate governance adviser for min two years
which increases company's costs
Interview with the expert:
Lex Lee (Director), Deloitte Singapore
Audit Committee representation for listed client engagements
Extensive experience in Assurance and Risk management
http://www.linkedin.com/profile/view?id=12069637&locale=en_US&trk=tyah&trkInfo=tarId%3A1392471146948%2Ctas%3Alex%2Cidx%3A2-1-2

Companies have a single board structure, answerable to shareholders. Employees do not have representation.
Non-executive, executive and independent directors are recognized in the Companies Act and Code of Corporate Governance.
At least 1/3 of directors should be independent, increasing to half if the chairman is not independent.
"Independent": no relationship with the company, its 10% shareholders or its officers that could interfere with the exercise of independent judgment.
Companies registered in Singapore must have 1 resident on the board; if registered abroad but listed in Singapore, they must have 2 residents.
Non-executive and independent directors are subject to the same duties and liabilities as executive directors. Distinction between executive and non-executive directors in the level of skill to be expected.

Thank you for your interest!
Full transcript