Friday 21 November 2014

Singapore corporate governance rules 'top in Asia-Pacific': Balancing Rules and Flexibility Report

Republic also ranked No. 3 overall in study of 25 markets globally
By Melissa Tan, The Straits Times, 20 Nov 2014

CORPORATE governance requirements in Singapore are the clearest and most comprehensive across the entire Asia-Pacific region, a new study has found.

However, it spotted a few inconsistencies between different sets of corporate governance guidelines applying to firms here.

Broadly, corporate governance refers to the rules by which a company is controlled and how it balances the interests of shareholders, customers, creditors, the Government and other stakeholders.

The report, which was done jointly by the Association of Chartered Certified Accountants (ACCA) and consultancy KPMG, looked at 25 markets globally and did not assess how closely firms complied with the requirements.

Singapore was in overall third place, behind Britain, which was No. 1, and the United States.

The Republic trumped Australia and Malaysia, which shared fourth position, and Hong Kong, which was ranked seventh just above Russia.

In general, developed markets such as Singapore had better defined corporate governance requirements than developing markets. This indicates that the maturity of the economy and capital markets plays a part in shaping a country's corporate governance rules, the report said.

"As developing markets seek to build confidence in capital markets, establishing well-defined corporate governance requirements is a lever for doing so."

However, the study also pointed out that no matter how well specified corporate governance requirements are, they may be hard to enforce.

Only 44 per cent of the 1,800 corporate governance rules examined in the study were mandatory.

The rest were either voluntary or "principles-based", which lets firms get away with giving an explanation for not complying with that requirement.

Singapore's approach to corporate governance is a blend of mandatory rules and optional guidelines, noted the report.

ACCA and KPMG said in a statement yesterday that Singapore's corporate governance requirements have been recently "enhanced" via revisions to the code of corporate governance and Singapore Exchange (SGX) listing rules.

However, Ms Leong Soo Yee, head of ACCA Singapore, said that some corporate governance rules could be tightened further.

These include rules related to documenting the role of the board, optimising board diversity and skill sets, disclosing codes of conduct, formalising board performance evaluations and disclosing more about stakeholder engagement, she said.

Mr Irving Low, head of risk consulting at KPMG in Singapore, said that implementing corporate governance well would help companies take better advantage of opportunities that will arise as South-east Asian economies continue to grow.

However, the study also found one inconsistency between the various sets of corporate governance instruments here.

This was that, on the one hand, SGX listing rules say the company's board "must provide an opinion on the adequacy of internal controls".

But, on the other hand, the corporate governance code says that the board "must comment on the adequacy and effectiveness of risk management and internal control systems", the report said.

The code of corporate governance in Singapore was revised in May 2012.

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