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Corporate Governance in Asia Pacific : Singapore (One of the leading…
Corporate Governance in Asia Pacific : Singapore
One of the leading financial centres in Asia, offering a broad range of financial services, including banking, insurance, investment banking, and treasury services.
In just over four decades, it has established a thriving financial centre of international repute which attracts business on a global basis as well as from the wider Asia-Pacific region. The Singapore Exchange (SGX) has some 800 companies listed, about one-fifth of which are overseas companies. Temasek Holdings is an investment company that was incorporated under the Singapore Companies Act in 1974 to hold and manage investments and assets previously held by the
Singapore government.
Key characteristics influencing Singaporean corporate governance
Main business form - Public limited companies
Predominant ownership structure - Families, states
Legal system - Common law
Board structure - Unitary
Important aspect - Influence of State (for example, via Temasek Holdings)
Board matters
The Board’s conduct of affairs
: Principle 1—Every company should be headed by an effective Board to lead and control the company. The Board is collectively responsible for the long-term success of the company. The Board works with management to achieve this objective and management remains accountable to the Board.
Board composition and guidance
: Principle 2—There should be a strong and independent element on the Board, which is able to exercise objective judgement on corporate affairs independently, in particular, from management and 10% shareholders. No individual or small group of individuals should be allowed to dominate the Board’s decision making.
Chairman and Chief Executive Officer
: Principle 3—There should be a clear division of responsibilities between the leadership of the Board and the executives responsible for managing the company’s business. No one individual should represent a considerable concentration of power.
Board membership
: Principle 4—There should be a formal and transparent process for the appointment and
re-appointment of directors to the Board.
Board performance
: Principle 5—There should be a formal annual assessment of the effectiveness of the Board as a whole and its board committees and the contribution by each director to the effectiveness of the Board.
Access to information
: Principle 6—In order to fulfil their responsibilities, directors should be provided with complete, adequate and timely information prior to board meetings and on an on-going basis so as to enable them to make informed decisions to discharge their duties and responsibilities.
Remuneration matters
Procedures for developing remuneration policies
: Principle 7—There should be a formal and transparent procedure for developing policy on executive remuneration and for fixing the remuneration packages of individual directors. No director should be involved in deciding his own remuneration.
Level and mix of remuneration
: Principle 8—The level and structure of remuneration should be aligned with the long-term interest and risk policies of the company, and should be appropriate to attract, retain and motivate (a) the directors to provide good stewardship of the company, and (b) key management personnel to successfully manage the company. However, companies should avoid paying more than is necessary for this purpose.
Disclosure of remuneration
: Principle 9—Every company should provide clear disclosure of its remuneration policies, level and mix of remuneration, and the procedure for setting remuneration, in the company’s Annual Report. It should provide disclosure in relation to its remuneration policies to enable investors to understand the link between remuneration paid to directors and key management personnel, and performance.
Accountability and audit
Accountability
: Principle 10—The board should present a balanced and understandable assessment of the
company’s performance, position, and prospects.
Risk management and internal controls
: Principle 11—The Board is responsible for the governance of risk. The Board should ensure that Management maintains a sound system of risk management and internal controls to safeguard shareholders’ interests and the company’s assets, and should determine the nature and extent of the significant risks which the Board is willing to take in achieving its strategic objectives.
Audit committee
: Principle 12—The Board should establish an Audit Committee (“AC”) with written terms of reference which clearly set out its authority and duties.
Internal audit
: Principle 13—The company should establish an effective internal audit function that is
adequately resourced and independent of the activities it audits.
Shareholder rights and responsibilities
Shareholder rights
: Principle 14—Companies should treat all shareholders fairly and equitably, and should recognize, protect, and facilitate the exercise of shareholders’ rights, and continually review and update such governance arrangements.
Communication with shareholders
: Principle 15—Companies should actively engage their shareholders and put in place an investor relations policy to promote regular, effective and fair communication with shareholders.
Conduct of shareholder meetings
: Principle 16—Companies should encourage greater shareholder participation at general meetings of shareholders, and allow shareholders the opportunity to communicate their views on various matters affecting the company.