Opening Keynote Address by Mr Edwin Tong, Senior Minister of State for Law & Health, at the Securities Investors Association (Singapore) 19th Investors' Choice Awards Ceremony
25 Sep 2018 Posted in Speeches
Mr David Gerald, Founder, President & CEO of Securities Investors Association (Singapore)
Mr Daniel Teo, Chairman, SIAS
Ladies and Gentlemen
Thank you for the invitation to the 19th Investors’ Choice Awards Dinner Presentation Ceremony. I am delighted to join you this evening, and to celebrate the achievement of companies and individuals who have flown the flag, and held up high corporate governance standards in Singapore.
Background of SIAS and Corporate Governance Week
Since its inception in 1999, SIAS has been an effective stakeholder in helping to strike a fair balance between investors on the one hand and corporates on the other. It has been a stalwart champion in helping to raise and strengthen corporate governance standards, as well as promoting investor education and investor rights.
As part of its initiatives, SIAS has organised the annual Corporate Governance Week since 2010, to promote good corporate governance practices among listed companies and all stakeholders.
This year’s Corporate Governance Week explores the theme of whether corporate governance is a help or a hindrance to businesses. Corporate governance is a means to an end, which is to ensure that our businesses are primed for long term and sustainable success.
The challenge is to strike a fair balance, amongst the interests of regulators, businesses and individuals, without compromising business innovation and investor accountability. For Singapore to remain relevant in the rapidly evolving and complex and often, disruptive, global economy, our investment environment must be robust, and our governance landscape must be sound and resilient. Yet, such governance efforts must not stifle business innovation, and blunt our international competitiveness. This requires thoughtful architecture, and collective efforts from all quarters.
Improving corporate transparency and diversity
Building a resilient and progressive corporate governance ecosystem requires attention to accountability, transparency, and sustainability. But what does this all mean?
The 2018 Country Report for Singapore’s ASEAN Corporate Governance Scorecard is in recently. Singapore companies saw a slight improvement from 2015 in the area of shareholder rights and treatment, no doubt due, at least in part, to the efforts of SIAS.
However, there remains room for improvement in two areas, enhancing transparency, and board diversity. These factors help companies to manage their risks and grow sustainably, and take on added significance in the face of market complexities. I will share some key developments in these two areas.
- Enhancing corporate transparency
First, there are increased efforts to strengthen Singapore’s governance, through greater transparency of corporate entities. It is an ever changing paradigm, because businesses have to change with the times and catch up with new ways of doing business and new ways of transactions as well. So, issues like how we regulate cryptocurrency, Bitcoins and other such mechanisms will come to the fore.
Money laundering, terrorism financing and tax evasion are increasingly becoming global concerns. As such, the identities of ultimate owners and controllers of business entities is also gaining international importance.
- To address the concern of the misuse of corporate entities for illicit purposes, international efforts have focused on making the ownership and control of corporate entities more transparent. For instance:-
- European Union (EU) member states are required, under the new and more stringent EU Fifth Anti-Money Laundering Directive, to set up full public registers of corporate beneficial ownership information by January 2020.
- he United Kingdom and several other jurisdictions are now also working toward automatic exchange of beneficial ownership information.
Given that our major trade and economic links to Europe are strong, and our status as a responsible, trusted, and clean international financial centre, it is important that Singapore also has measures in place, so that beneficial ownership information is available and accessible to regulators and for law enforcement purposes.
At the SIAS Investors’ Choice Awards two years ago, we announced the intention to introduce new obligations to make the ownership and control of business entities more transparent. After public consultation, Singapore introduced obligations in March last year, to require companies, foreign and local, and limited liability partnerships to obtain and maintain beneficial ownership information in a register kept by such entities, and to make such information available to public agencies upon request. The Accounting and Corporate Regulatory Authority (ACRA) has also issued various guidance materials to help these entities prepare for and comply with the new obligations.
As part of these on-going national efforts to further strengthen Singapore’s resilience to money laundering, terrorism financing, and other such illicit activities, the Ministry of Finance (MOF) and ACRA will be exploring the setting up of a central, non-public beneficial ownership register for companies and limited liability partnerships.
- A central non-public register is likely to have the following characteristics:
- First, corporate entities, whether local or foreign, and limited liability partnerships will be required to file beneficial ownership information with ACRA in the future. Such information is already being maintained at the offices of such entities, or by their corporate service providers.
- Second, the register will not be accessible to the public. Access will be given to public agencies, similar to the access rights under the current regime. Law enforcement agencies, in particular, will have access.
MOF and ACRA will be conducting a study on the legal and operational framework needed to implement such a central, non-public beneficial ownership register. Feedback will be sought on the proposed framework in due course on what the appropriate mechanisms might be, what the appropriate levers are, and how the structure might be built.
- Board Diversity
Another facet of corporate governance is board diversity. The board is the nerve centre of a company, controls the activities, and is where the heart and soul of the company resides. Board diversity encourages more robust and constructive decision-making processes, and it generally makes for more effective boards. For example, studies have shown that more gender diverse boards generally lead to better financial performance.
In Singapore, 14.7% of the board directorships of the top 100 SGX-listed companies are held by women (as at 30 June 2018). I believe the jump was by about 1.5%, compared to the prior six months preceding that at the end of 2017. So that is quite a marked improvement. Yet, we still have some way to go. When you compare us with Norway, which has 42.1% female representation on its boards of directors, that shows the gap and the issues we face on diversity.
- Last month, MAS issued a revised and streamlined Code of Corporate Governance aimed, in part, at board renewal and diversity, and strengthening director independence. SGX has also amended its listing rules in line with the Code revisions. For example:-
- At least one-third of the board should be made up of independent directors, so as to strengthen board independence and oversight.
- Companies must also disclose their board diversity policy and the progress made towards implementing this policy. This creates a culture of transparency and accountability to shareholders. Globally, investors are also sitting up and taking more notice of each company’s diversity policy.
The amendments to the Code of Corporate Governance and the Listing Rules reflect a growing awareness and a strong acceptance from the business community for board diversity. However, these amendments are only one facet of helping the board to become more diverse. Meaningful transformation can only happen if it is embraced by the corporates themselves as part of the corporate culture, and it must happen at the individual, organizational and governmental level, requiring all quarters to get on board and be proactive about having diversity. Sustained commitment in this area will boost our standing as a progressive player on the international stage.
Our country’s reputation as a trusted and transparent business and financial hub cannot be taken for granted. We have done well thus far, but our closest challengers have closed the gap. We need collective and constructive efforts from all stakeholders in the areas of transparency and diversity, to better to secure our reputation build on it, and stand out from the rest of the field.
On this note, it is heartening to see that the Investors’ Choice Awards 21eflect SIAS’ holistic approach in fostering a culture of accountability. The Awards celebrate excellence, by companies and individuals alike, in all aspects of corporate governance. These values of innovation, sustainability, diversity, shareholder communication, and transparency are the key to long term success of the company, and contribute to a robust investment environment for both investors and businesses.
- On that note, my heartiest congratulations to all the award winners for your outstanding efforts in seeking to improve and enhance corporate governance in Singapore. I wish you all an enjoyable evening ahead. Thank you.
The ASEAN Corporate Governance Scorecard, a joint initiative of the ASEAN Capital Markets Forum and the Asian Development Bank, was started in 2011. It assesses the corporate governance of the 100 largest publicly listed companies in six participating ASEAN member states – Indonesia, Malaysia, the Philippines, Singapore, Thailand, and Vietnam.
Asean Corporate Business Scorecard: Singapore companies’ progress flatline (Business Times, 4 April 2018).
Asean Corporate Business Scorecard: Singapore companies’ progress flatline (Business Times, 4 April 2018).
Women do make a difference (Business Times, 4 July 2018).
Women representation on boards of Top 100 SGX-listed companies up 20% from a year ago to hit 14.7% (Diversity Action Committee Singapore, News Release, 31 July 2018).
 Women Directors Increase to 13.1% on boards of top 100 companies in 2017 (Diversity Action Committee Singapore, News Release, 13 February 2018).
 Rule 210(5)(c) of the SGX Listing Rules (Mainboard)/Rule 406(3)(c) of the SGX Listing Rules (Catalist). This rule will come into effect on 1 January 2022.
Code of Corporate Governance (6 August 2018) at paragraph 2.4.
 Making a strong case for board gender diversity (Business Times, 4 July 2018).
Last updated on 27 Sep 2018