Singapore Exchange Releases Comprehensive Guide for Corporate Governance
SINGAPORE – The Singapore Exchange (SGX) has released a disclosure guide aimed at aiding companies’ compliance with the country’s corporate governance regulations. The document, structured in a concise question & answer-format, will not only help companies to comply with key aspects of governance, but will also make it easier for investors to assess the companies they might invest in.
The new legal guidelines are in compliance with Singapore’s Code of Corporate Governance (the Code), which was revised in 2012. Though compliance is not mandatory for SGX listed companies, they will still have to publish their governance practices in their annual reports. Nonetheless, the “comply-or-explain” approach still makes it mandatory to point out and justify any deviations from the Code. The SGX also encourages listed companies to address the questions in the guide and include the answers together with audited financial statements in their annual report in order to accommodate shareholders and potential investors with an authentic performance review.
According to SGX´s press release, recent surveys have revealed that although companies in Singapore generally abide by the Code, disclosures about remuneration, risk governance, board diversity, and sustainability were still lacking comprehensiveness.
Since the introduction of the reviewed version of the Code in 2012, corporate governance has generally been improving in Singapore, as the 2014 Governance and Transparency Index (GIT) by the National University of Singapore´s Business School revealed. From now on, the ranking will also consider how companies address the questions in the new guide. Furthermore, the Securities Investor Association (SIS) of Singapore has stated that implementing the guide will be part of the assessment base for their annual Singapore Corporate Governance Awards.
The results of the GIT are in line with the ASEAN Corporate Governance Scorecard, a joint initiative by the ASEAN Capital Markets Forum (ACMF) and the Asian Development Bank established in 2013. The scorecard builds an essential framework for economic convergence in the ASEAN Economic Community (AEC).
The GIT assesses companies on how they abide by the laws, rules, and regulations of each country, as well the five OECD principles: rights of shareholders, equitable treatment of shareholders, role of stakeholders, disclosure and transparency, and responsibilities.
In the latest scorecard, released mid-2014, Thailand ranked highest with 75.9 out of 142 points, but Singapore saw the largest year-on-year increase of 16 points to 71.68. Among the six ASEAN nations represented in the survey, Singapore scored highest in “disclosure and transparency” and “responsibilities of the board”.
One of the key goals of ASEAN economic integration at the end of 2015 is to provide shareholders as well as potential foreign and domestic investors valuable insight in order to facilitate the process of recognizing strengths and areas of improvement for publicly listed companies. Transparency helps to build confidence, which is a prerequisite for a proper functioning market economy.
Companies in Singapore and ASEAN should take the words of June Sim, Head of Listing Compliance at SGX as an incentive: “Companies with high disclosure standards and sound corporate governance practices will rise above the competition and benefit from trust and confidence by stakeholders, the outcome of which is a better capital market.”
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