Time to review the code of corporate governance?


    The Business Times, 9 February 2024


    IN NOVEMBER 2023, then-Managing Director of the Monetary Authority of Singapore (MAS) Ravi Menon announced that MAS will be assessing the merit of introducing a new provision in Singapore’s Code of Corporate Governance (Code) to promote good corporate culture.

    The Code was first introduced in 2001, with the latest revision in 2018. In the six years since, there have been some updates – the latest in January 2023, to reflect the hardcoding of the nine-year rule for independent directors. Perhaps it is timely for a more comprehensive review of the Code as a whole, given the pace of corporate governance (CG) developments in Singapore and worldwide.

    Board culture, values and purpose

    A significant development is the growing scrutiny of ethical business practices, with financial scandals and accounting fraud hitting the headlines. Across the world, regulators have emphasised establishing an appropriate corporate culture.

    The Hong Kong Stock Exchange, following its CG review in 2021, introduced a new provision in its CG code requiring boards to establish the issuer’s purpose, values and strategy – and align the issuer’s culture with them.

    Australia’s CG Principles and Recommendations require boards to articulate and approve the company’s statement of values, as well as oversee management in implementing the company’s strategic objectives and instilling the company’s values.

    The UK recently revised its CG code, which now requires governance reporting to focus on board decisions and their outcomes in the context of the company’s strategy and objectives. Boards are also required to assess and monitor culture, and explain how the desired culture has been embedded.

    The CG Code in Singapore states that the board should set the “desired organisational culture”. This could be sharpened by including provisions in the Code for the alignment of culture, especially risk culture, with the organisation’s purpose and values.

    ESG and sustainability

    The Code mentions the need to “achieve long-term sustainable business performance” but not sustainability or a focus on environmental, social and governance (ESG) factors. In contrast, the Singapore Exchange listing rules have required issuers to publish sustainability/ESG reports since 2016.

    The Hong Kong code was updated in 2022 to require boards to evaluate and determine material risks relating to ESG and review annually the adequacy of resources for ESG performance and reporting.

    Likewise, the Australian Principles specifically require boards to disclose whether they have any material exposure to, and how they manage environmental or social risks, and if the risk management framework deals adequately with climate change.

    In October 2023, the Asean Capital Markets Forum announced revisions to the Asean CG Scorecard assessment structure – incorporating sustainability/ESG considerations from the OECD Principles of Corporate Governance 2023. Now may be an opportune time for the Singapore Code to do the same, to guide companies in the right direction.


    One aspect of the “S” of ESG at the forefront of thought leadership circles around the world is diversity. While much of the discussion in the past focused on gender diversity, the trend is for broader cognitive diversity on boards.

    The Hong Kong code now requires disclosure on gender ratios in the workforce (including senior management), whilst Australia requires the board to set measurable objectives for achieving gender diversity in the board, senior executives and workforce generally, with a gender diversity target of 30 per cent for larger Australian entities. The new UK code was amended to promote diversity, inclusion and equal opportunity, without referencing specific groups.

    Given these developments, there is arguably scope to expand, in the Singapore Code, how diversity in skills, knowledge, experience, age and gender should complement international exposure, tenure and cultural or ethnic diversity – to optimise board effectiveness and achieve cognitive diversity.

    Other board issues

    Other developments on the agenda of boards today that are not directly addressed in the Code include digitalisation, artificial intelligence, cyber security and nature- related risks, especially in view of the release in late 2023 of the report of the Taskforce on Nature-related Financial Disclosures.

    In the Asean CG Scorecard report, it was highlighted that some areas for improvement include having the Nominating Committee comprise entirely of independent directors – while the Singapore Code requires that they make up a majority of the board.

    In the same vein, the revised Asean CG Scorecard expects boards to disclose and report on the process for management succession planning. Menon had previously highlighted that boards can gain the trust of their stakeholders by doing better in the critical area of board evaluation and “introspection on performance”. The UK code recommends that board chairs commission a regular externally-facilitated board performance review, which for larger companies should happen at least every three years.

    At the end of the day, Singapore needs to find its own path on its CG journey. While Singapore has not been static and has adopted a continuous ongoing review approach for the Code by raising specific issues on an ad hoc basis, there are merits to undertaking a holistic review exercise periodically.

    With the gales of regulatory change blowing across the world, we should raise our sails to capture the wind as we seek to race ahead amidst turbulent waters.

    The writer is a vice-chairman of the Singapore Institute of Directors.