SINGAPORE (Aug 6): The Monetary Authority of Singapore (MAS) has accepted all the recommendations by the Corporate Governance Council and issued the revised Code of Corporate Governance which clarifies how companies should adopt the comply-or-explain regime.

The revised code is intended to ensure companies provide meaningful disclosures to their stakeholders.

In line with the council’s recommendations, the Singapore Exchange listing rules have also been amended. Key changes to the code include encouraging board renewal, strengthening director independence and enhancing board diversity to reinforce board competencies. Code revisions were also made on disclosures of the relationship between remuneration and value creation, and consideration of the interests of groups other than shareholders to encourage better engagement between companies and all stakeholders.

Two changes stand out in particular. The appointment of Independent Directors or IDs beyond nine years will now be subject to a two-tier vote by all shareholders, excluding directors, CEO and associates. If the ID is not voted in, the person can continue to serve on the board as a non-independent director. The other is a more stringent definition of the independence of an ID by lowering his shareholding threshold to 5% from 10%.

The revised code will take effect for annual reports covering financial years starting January 2019. However, a longer transition period of three years will be provided for changes in the SGX listing rules relating to board composition, to provide companies with more time to make board composition changes.

With the issuance of the revised code, the Corporate Governance Council will be dissolved, MAS will instead establish an independent Corporate Governance Advisory Committee (CGAC) to advocate good corporate governance practices. The CGAC will monitor companies’ implementation of the code and provide support to companies by promulgating good practices and areas for improvement.

Infographics on the recommendations

The CGAC will also advise regulators on corporate governance issues. The CGAC will comprise senior practitioners with experience as board chairmen or directors, corporate governance experts and representatives from diverse stakeholder groups. MAS expects to establish the CGAC by the end of this year.

In his keynote speech at Singapore Governance and Transparency Forum on Monday held at Marina Mandarin Singapore, Ong Chong Tee, Deputy Managing Director MAS, thanked the Corporate Governance Council for weighing all inputs and feedback carefully to arrive at a set of balanced and meaningful recommendations.

Ong noted there were some views calling on regulators to adopt quicker or harsher actions in response to corporate governance violations. Others felt that directors should be held more accountable for their fiduciary duties, or breaches in their fiduciary duties.

Ong said investigations are usually complex and time-consuming affairs especially if there are cross-border elements involved. At the same time, it is important that Singapore’s financial sector operates with a clear rule of law, as well as fair and transparent legal processes. This is to assure a trusted regime for everyone.

“We must allow for thorough investigations as a matter of legal and investigation integrity. There is often a web of details to be ascertained in each case of possible misconduct. Any premature updates to the public can also compromise investigations. In such situations, regulators would avoid alerting suspects who are under investigation at the outset, so as not to prejudice the investigations, in the process of evidence gathering,” says Ong.

As a matter of due process, the MAS does not reveal information during ongoing investigations until the investigations have been concluded, said Ong. Some of these considerations equally apply to the SGX as the frontline market regulator.

Notwithstanding this, Ong said the MAS supports putting out more information on its investigation outcomes and of its enforcement approach including putting out more timely press updates on its enforcement actions as well as publishing these on its website.