Media Division, Ministry of Information and The Arts,
36th Storey, PSA Building, 460 Alexandra Road, Singapore 119963.
Tel: 3757794/5
___________________________________________________________
SPEECH BY MINISTER FOR FINANCE, DR RICHARD HU, AT THE
LAUNCH OF THE SINGAPORE INSTITUTE OF DIRECTORS (SID) ON THURSDAY, 16 DEC
1999 AT 12.30 PM AT THE ISLAND BALLROOM, SHANGRI-LA HOTEL
Mr Chew Heng Ching, President of the Singapore Institute of Directors,
Distinguished guests,
Ladies and Gentlemen,
Global trends in corporate governance
The responsibilities of company directors are an issue
of corporate health no company boardroom can afford to ignore. Around the
world, shareholders and investors are increasingly driving corporations
along the path of "enlightened self-interest" to adopt practices which
place directors in positions of better and clearer accountability to shareholders.
In the US, the "boardroom revolution" that began in the early 1990s has
seen large institutional investors putting pressure on corporations to
adopt clear codes of conduct for directors. Many corporations have responded
by, among other measures, publishing their internal boardroom practices.
Similarly, in the United Kingdom, every listed company is now obliged to
incorporate in its annual report an account of how well the company has
applied a broad set of corporate governance principles. The health of internal
corporate relationships has increasingly become an important factor in
the worth of a corporation to the investing public and its shareholders.
Singapore’s place in global competitiveness rankings
The inception of the SID comes not a moment too soon.
Even as our economic prospects start to look up, we would be committing
the grave mistake of forgetting lessons learnt from the Asian economic
crisis if we do not push on with the upgrading of our corporate environment.
In the somewhat madcap economic spurt of the 1980s, many had ignored the
importance of strong and self-sustaining institutional governance frameworks
in the conduct of their corporate affairs. Had the quality of corporate
governance, the invigoration of shareholders’ participation, and the vigilant
upgrading of accounting standards been worked into the system as the East
Asian economies grew, they may well have averted or mitigated the meltdown.
Unreported losses and hidden liabilities would have been flushed out from
the closet sooner had these precepts been in place.
We cannot sit back in complacent ease, imagining that
Singapore was entirely free of the taint of the crisis. In recent global
competitiveness rankings in areas approximating corporate governance, Singapore
has not fared as well as it does in other areas such as openness of economy,
quality of Government, finance and infrastructure, technology, and institutions.
For example, although the World Economic Forum ranked Singapore No.1 overall,
we came in only at no. 12 for overall management quality and the quality
of internal financial control systems. In almost all categories related
to corporate governance, such as quality of corporate boards and financial
disclosure, we consistently lagged behind our OECD counterparts and in
some instances, Hong Kong.
The same is true for accounting standards. Accounting
standards the world over are trending towards convergence on internationally
accepted principles. The Public Accountants Board (PAB) and the Institute
of Certified Public Accountants of Singapore (ICPAS) are already working
on making our Singapore Statements of Accounting Standards (SAS) at least
identical to International Accounting Standards (IAS) as far as possible.
SAS will exceed IAS in stringency where appropriate, and new IAS will be
reviewed for adoption as SAS within a year of the IAS becoming operative.
In addition, the Singapore Exchange will adopt the IAS and the US Generally
Accepted Accounting Principles (GAAP) as accounting standards permitted
for use by listed companies, by early next year.
Partnership Approach to Promoting Corporate Governance
The Government has set in motion various processes to
upgrade the fundamental underpinnings of our corporate and securities markets.
The reviews initiated by the Financial Sector Review Group and the Corporate
Finance Committee, as well as the de-mutualisation and merger of the Singapore
Exchange, have all been part of the move to place our financial and corporate
sectors on a more competitive footing. Underlying this is a reorientation
of our regulatory philosophy towards a disclosure basis rather than merit
review.
Role of the Singapore Institute of Directors
The "re-invention" of our regulatory approach is an ongoing
process. But the Government can only do so much to set the regulatory framework
right. The key in the race to position ourselves as a world-class business
centre lies in the strength of our partnership with the private and people
sectors. A strong, flexible and responsive regulatory environment should
work hand in hand with enterprising capital and a vibrant civic effort,
that demand high standards of disclosure and accountability.
It is very encouraging to see the SID active in this effort.
I commend the Institute in pursuing its objective of raising the level
of corporate governance in Singapore, and aiming to promote the highest
professional and ethical standards in company directorship. The SID is
in the process of laying out a Code of Professional Conduct for its member
directors, as well as a Code of Best Practices in Corporate Governance.
These are worthy projects that ought to be undertaken in close collaboration
with the people and public sectors.
The importance of civic efforts in pushing the envelope
in standards of corporate governance cannot be overstated. This has been
the experience of countries ahead of us in this regard. The UK Institute
of Directors (IOD), for example, co-sponsored the Hampel Report on Corporate
Governance together with the London Stock Exchange and the Confederation
of British Industry. Australia’s Corporate Law Economic Reform Program
made a key recommendation that the Australian Stock Exchange (ASX) should
encourage good corporate governance not by legislative prescription, but
by the encouragement of civic investors’ groups. In nearly all developed
economies, civic efforts are closely intertwined with changes by the regulators.
Here in Singapore, many company directors still plead ignorance for flouting
statutory obligations. SID can play a pivotal role in raising awareness
and standards in company directorship.
Review of Corporate Regulation and Governance
The Ministry of Finance, together with the Monetary Authority of Singapore and the Attorney-General’s Chambers, is sponsoring a comprehensive review of corporate regulation and governance in Singapore. We are setting up three private-sector-led committees focusing on three areas, namely:
Company Legislation and the Regulatory Framework;
Disclosure and Accounting Standards; and
Corporate Governance.
The review is aimed at enhancing the existing framework
for corporate law and governance, to strengthen Singapore’s competitiveness
as a world-class business and financial centre. The committees will be
given a free hand to come up with their recommendations on the major aspects
of corporate regulation and governance in Singapore. They will be given
up to a year to complete their deliberations.
Company Legislation and Regulatory Framework
The Committee on Company Legislation and Regulatory Framework
will review Singapore’s corporate law and regulatory framework, comparing
Singapore’s approach and legal structure with the standards and best practices
in major and reputable business jurisdictions. It will look at the structure
and composition of the Companies Act and its relationship with other statutes
that influence corporate governance standards. This will be on top of changes
to be made and already made as a result of the recommendations of the Corporate
Finance Committee. The committee will also surface proposals to enhance
efficiency and reduce red tape in the administration of corporate regulation.
Disclosure and Accounting Standards
The Committee on Disclosure and Accounting Standards will
review the process by which accounting standards are set, maintained and
regulated in Singapore, compared with overseas jurisdictions. It will look
at the Singapore Statements of Accounting Standards to check on their alignment
with international standards if not higher. The committee will also review
the approach, development and promotion of best practices in disclosure
requirements, especially among publicly listed companies in Singapore.
Corporate Governance
The Committee on Corporate Governance will review the
development and promotion of best practices in corporate governance, especially
among publicly listed companies in Singapore. It will examine international
best practice benchmarks such as the OECD Principles of Corporate Governance,
to see how they should be adopted in the Singapore context. The committee
will look at how to develop and promote best boardroom practices, and improve
the training of company directors. No doubt it will take into account the
role and work of the SID.
Conclusion
This review of Corporate Regulation and Governance is part of the continual effort to improve the corporate regulatory and governance environment in Singapore to make Singapore a financial and business hub of world-class standard. It is an effort that must involve the public, private and people sectors working together. The goals and challenges that SID has set itself are in the spirit of what we seek for the world of business in Singapore as we move into the 21st century. I warmly congratulate the SID on its inaugural General Meeting and official launch, and offer my best wishes for an active, energetic and lively future.
------------------------