Proposed revisions to corporate governance code revealed

Proposals include requiring companies to fully disclose the remuneration of each individual director and the CEO on a named basis.

The Monetary Authority of Singapore reported that the Corporate Governance Council has carried out a comprehensive review of the Code of Corporate Governance over the last 18 months.

A consultation paper has been released which sets out the key proposals recommended by the Council:

Key Proposal 1: To include in the Code the following relationships as additional instances where a director will be deemed non-independent:
- if the director is or was, in the current or any of the past three financial years, a substantial shareholder, partner, executive officer, or director of organisations to which the company or any of its related corporations made, or received significant payments or material services in the current or immediate past financial year;
- if the director is a substantial shareholder or an immediate family member of a substantial shareholder of the company,
- if the director is or has been directly associated 2 with a substantial shareholder of the company in the current or any of the past three financial years; and
- if the director has served on the Board for more than nine years from the date of his or her first election.

Key Proposal 2: To introduce in the Code a new provision that independent directors should make up at least half of the Board where (i) the Chairman and the Chief Executive Officer (“CEO”) is the same person; (ii) the Chairman and CEO are immediate family members3; (iii) the Chairman and CEO are both part of the management team; or (iv) the Chairman is not independent.

Key Proposal 3: To introduce in the Code new requirements for companies to arrange and fund training for new and existing directors, and disclose the induction, orientation and training provided to new and existing directors in its annual report.

Key Proposal 4: To introduce in the Code a new requirement for the Nominating Committee to review and make recommendations to the Board on training programmes for the Board.

Key Proposal 5: To introduce in the Code a provision that the Nominating Committee should decide if a director is able to and has been adequately carrying out his or her duties as a director, taking into consideration the director’s number of listed company board representations and other principal commitments. The Board should further determine the maximum number of listed company board representations which any director may hold, and disclose this in the company’s annual report.

Key Proposal 6: To introduce in the Code a provision that directors should not appoint alternate directors except for limited periods in exceptional circumstances.

Key Proposal 7: To include in the Code that the level and structure of remuneration should be aligned with the long-term interests and risk policies of the company. Additional guidance will also be given to companies to consider provisions allowing the company to reclaim incentive components of remuneration from directors and key management personnel in exceptional circumstances of misstatement of financial results, or of misconduct resulting in financial loss to the company.

Key Proposal 8: To introduce in the Code a provision that the Remuneration Committee should ensure that existing key relationships between the company and its appointed remuneration consultants will not affect the independence and objectivity of the remuneration consultants.

Key Proposal 9: To include in the Code additional guidance that companies should disclose more information on the link between remuneration and performance of directors, CEOs and key management personnel5.

Key Proposal 10: To introduce in the Code a provision that companies should fully disclose the remuneration of each individual director and the CEO on a named basis. Companies should disclose in aggregate the total remuneration paid to the top five key management personnel (who are not directors or the CEO).

Key Proposal 11: To introduce in the Code provisions that (i) the Board is responsible for the risk governance of the company and should determine the nature and extent of risks which the company may undertake, and that it should ensure that management maintains a sound system of risk management and internal controls; and (ii) the Board should assess appropriate means to carry out its responsibility of overseeing the company’s risk management framework and policies.

Key Proposal 12: To introduce in the Code a provision that the Board should comment on whether it has received assurance from the CEO and CFO that (i) the financial records have been properly maintained and the financial statements give a true and fair view of the company’s operations and finances; and (ii) an effective risk management and internal controls system has been put in place.

Key Proposal 13: To introduce in the Code a new principle, and accompanying guidelines, on ‘Shareholder Rights’ to guide companies in their engagement with shareholders.

Key Proposal 14: To introduce as an annexure to the Code a statement on the role of shareholders in engaging with the companies in which they invest.

Key Proposal 15: To introduce in the Code a provision that companies should put all resolutions to vote by poll and make an announcement of the detailed results showing the number of votes cast for and against each resolution and the respective percentages.

The Corporate Governance Council invites interested parties to submit their views and comments on the proposals made in the paper, and the draft amendments to the revised Code. Electronic submission is encouraged. You may submit your comments by 31 July 2011 to:

The Secretariat, Corporate Governance Council
c/o Capital Markets Department
Monetary Authority of Singapore
10 Shenton Way
MAS Building
Singapore 079117
Fax: 62291350
Email: [email protected]