Executive Master of Business Administration (EMBA)

MBAE MGT 204: Corporate Governance and Ethics

Topic 3: Code of Code of Corporate Governance
Dr. James Kwan
Ph.D. Finance (UWA), MBA (Strathclyde), MBA Investment & Finance (Hull), MSc Digital Education (Edinburgh),
MSc Educational Assessment (Oxford), MBR (UWA), MSc Applied Positive Psychology & Coaching Psychology
(UEL), MSc Marketing (KCL), MRes Higher Education Research (Lancaster), BAcc (NTU), FCA Singapore, ASEAN CPA,
FCPA (Aust), FAIA (Acad), AMA (Aust), FHEA, CSFP, SDALT, Bok TC (Harvard), CEOT (Oxford), CEOCD (Oxford), ACTA

Code of Corporate Governance in

Singapore (2018)
• Issued by MAS on 6 August 2018
• Comply or explain
• Covering the following major principles:
– Board matters
– Remuneration matters
– Accountability and audit
– Shareholder rights and engagement
– Managing shareholders relationship

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 Directors’ and Officers’ Duties -
Classification is
Definitions
based on tasks &
• Definition of director includes: responsibilities,
– A person appointed as a director not titles like
– People who act in the position Director or CFO
– People who are accustomed to acting in the position
• Definition of an officer includes someone who:
– Participates in the decision making of the business; OR
– Can significantly affect the financial standing of the
company; OR
– Whose instructions the directors are accustomed to acting
on
• ‘Officers’ also includes receivers, administrators,
liquidators and trustees
• Accountants beware – External advisors and senior
managers may also be classified as officers
• Nearly all directors’ duties are also applicable to the
company’s officers
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Classification of directors
• Independent directors
– Are those who have no relationship with the company that
would, or could be perceived to, materially affect their decision
making
• Test for independence
– 3-year rule (executive, owner, adviser, material supplier or
customer)
– 5% shareholder rule
– Material contractual relationship rule
– The close family ties rule
– The 9-year rule
• The inclusion of independent directors has been promoted
as a solution to certain governance problems
– Directors with no prior experience of a listed issuer on the
Exchange must undergo training
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Code of Corporate Governance in
Singapore
• Board Matters
– disclosure of number of meetings of board
and board committee, attendance of every
board member
– independent directors ≥ 1/3 of board
– independent directors ≥ 1/2 of board (with a
lead independent director) if Chairman and
CEO is the same person; Chairman and CEO
are immediate family members; Chairman is
part of the management team or not an
independent director
– Chairman and CEO should be separate person
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Code of Corporate Governance in

Singapore

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Code of Corporate Governance in
Singapore
• Board Matters
– Nomination Committee (NC)
• ≥ 3 directors, majority (including NC Chairman)
should be independent
• lead independent director (if any) should be a
member of the NC

Code of Corporate Governance in

Singapore
• Remuneration Matters
– Remuneration Committee (RC)
• ≥ 3 directors, majority (including NC Chairman)
should be independent
• review and recommend to the Board the specific
remuneration packages for each director as well as
for the key management personnel
• disclosure of remuneration of directors, the CEO
and at least the top five management personnel in
bands of S$250,000, with breakdown (in % or S$):
base/fixed salary, variable or performance-related
bonuses, benefits in kind, stock options granted,
share-based incentives and awards, and other long-
term incentives
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Code of Corporate Governance in
Singapore
• Remuneration Matters
– Remuneration Committee (RC)
• disclose employee remuneration in bands of
$100k (immediate family members of director
or CEO)
• disclosed name of employees and their
relationship with the relevant director or CEO

Code of Corporate Governance in

Singapore

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Code of Corporate Governance in
Singapore

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Code of Corporate Governance in

Singapore
• Accountability and Audit
– Audit Committee (AC)
• ≥ 3 directors, majority (including NC Chairman)
should be independent
• all AC members should be non-executive
directors
• ≥ 2 AC members (including AC Chairman)
should have recent and relevant accounting or
related financial management expertise or
experience
• 2-year cooling-off period for partners/directors
of audit firms to serve on AC
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Code of Corporate Governance in
Singapore

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Code of Corporate Governance in

Singapore
• Accountability and Audit
– Audit Committee (AC)
• review the significant financial reporting issues and
judgements made
• review and report to the Board at least annually the
adequacy and effectiveness of the company’s internal
controls (financial, operational, compliance and IT)
• review the effectiveness of company’s internal audit
function, scope and results of the external audit
• meet with external and internal auditors at least
annually without the presence of management
• make recommendation to the Board on the
appointment, re-appointment and removal of external
auditors, and approving the remuneration and terms of
engagement of external auditors
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Code of Corporate Governance in
Singapore
• Shareholder Rights and Engagement
– companies should treat all shareholders fairly
and equitably
– companies should actively engage their
shareholders and put in place an investor
relations policy to promote regular, effective
and fair communication with shareholders
– companies should encourage greater
shareholder participation at AGM, and allow
shareholders the opportunity to communicate
their views on various matters affecting the
company
– companies have a dividend policy and
communicates it to shareholders 15

Code of Corporate Governance in

Singapore
• Managing stakeholders relationship
– companies have arrangements in place to
identify and engage with its material
stakeholder groups and to manage its
relationships with such group
– companies disclose in their annual report its
strategy and key areas of focus in relation to
the management of stakeholder relationships
during the reporting period.
– companies maintain a current corporate
website to communicate and engage with
stakeholders
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