They will also establish the industry-led Corporate Governance Advisory Committee by late 2019.
The Monetary Authority of Singapore (MAS) accepted the final recommendations of the Corporate Governance Council regarding the proposed revisions to the Code of Corporate Governance which eyes to encourage firms to innovate, grow, and boost investors confidence in the capital markets, an announcement revealed.
Amongst these recommendations is to streamline the code to focus on key tenets of corporate governance which shall be done by shifting baseline market practices to the Singapore Exchange’s Listing Rules (SGX LR). It also includes removing overly-prescriptive or duplicative requirements already in SGX LR from the code, and introducing a voluntary Practice Guidance to provide guidance on compliance with the code.
"The revised code is more concise and less prescriptive, and is designed to encourage more thoughtful application. It will help spur better corporate governance practices among companies to sustain long-term business performance," MAS Managing Director Ong Chong Tee said.
The Council also recommended the establishment of an industry-led Corporate Governance Advisory Committee (CGAC) which will foster long-term commitment by firms, professionals, investors, and regulators towards improving corporate governance standards.
MAS eyes to establish CGAC by the end of 2019 with its members comprising of senior practitioners with experience as board chairmen or directors, corporate governance experts, and representatives from diverse stakeholder groups.
"The establishment of the CGAC will strengthen the corporate governance ecosystem and enhance market discipline,” Ong commented.
The revisions also focused to rationalise tests of director independence in the code through setting out an overarching principle-based definition of director independence. Under the proposal, the nominating committee will be responsible to determine the director’s independence.
The shareholding threshold will also be revised in relation to determining director independence from 10% to 5% to align with the definition of “substantial shareholders” in the Companies Act and Securities and Futures Act.
Moreover, they also proposed to amend the SGX LR so that appointment of independent directors (IDs) who have served beyond nine years to a two-tier vote to get approval from the majority of all shareholders excluding those who also serve as directors or the CEO.
In terms of the board composition, the council recommended to shift the guideline for one-third of the board to comprise IDs from the code to the SGX LR. The council eyes to make the majority of the board to comprise of IDs as the current code only provisioned at least only half of the board to be IDs where the Chairman is not independent.
The Council also proposed to introduce a new provision for the board to comprise a majority of non-executive directors and for firms to disclose their board diversity policy and the progress they made to achieve it.
In addition, the Council wants firms to reveal the names and employees with remuneration that exceeds $100,000 who are substantial shareholders or immediate family of substantial shareholders.
To step up stakeholder engagement, the Council wants to introduce a principle and provisions for firms to consider and balance the needs and interests of material stakeholders.
“We believe that the final recommendations will lead to constructive and purposeful corporate governance practices and help companies sustain long-term success amidst the fast-changing business environment,” Council chairman Chew Choon Seng said.
Moreover, the Council responded to the feedback from public consultation which includes consequential amendments to the Listing Rules of the Singapore Exchange (SGX).
This is in relation to the proposed amendment in the SGX LR to clear expectations regarding the comply-or-explain regime with the intent to strengthen the emphasis on thoughtful and meaningful communication between companies and their stakeholders.
The Council recommended that compliance with the code Principles is mandatory so firms companies are required to describe their corporate governance practices.
The Corporate Governance Council was established by the MAS in February 2017 to review the code of Corporate Governance, delve into how the comply-or-explain regime could be made more effective, and propose mechanisms to track the progress made by listed companies in furnishing their corporate governance practices. The code was last revised in 2012.
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