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Singapore Airlines is the national airline of Singapore, the main activities of Singapore Airlines
take place at Changi International Airport - Singapore. Singapore Airlines is the only 5 * (5
star) airline in Southeast Asia. Originating from incorporation with Malaysia Airways Limited
in 1947, until 1972, Singapore Airlines split up independently and became one of Singapore's
largest and most developed GLC (Government – Linked Companies). Singapore Airlines
headquarters are located at Airline houses, Changi are of Singapore. Singapore Airline has a
strong presence in almost of Southeast Asia, South Asia, East Asia and Africa. The airline
offers high quality flights and trans-Pacific flights. In 2019, Singapore Airlines were honored
at the Singapore Corporate Awards 2019 for the quality of their corporate governance in their
board practices (Times, 2019).
This corporate governance essay will analyze and evaluate the quality of all corporate
governance mechanisms of Singapore Airlines. Therefore, this essay would give the reasons
about its strengths and weaknesses. Besides, give the recommendations to improve the
strengths in corporate governance of Singapore Airlines with reasonable analysis in
mechanisms and the knowledge learned about corporate governance.
(SingaporeAirlines, 2018/2019)
Board Composition is responsibility for oversights not only business performance but also
affairs of the Company and offers Management with overall guidance. Its main responsibilities
involve charting the strategic direction of the Group, guiding the management of digitalization,
technology and innovation, financial decisions and plan, reviewing and approving annual
budgets and monitoring the performance of the Group, approving significant acquisitions and
fundraising exercises, and ensuring that the Group complies with all laws and regulations as
relevant to the business as possible .
In a fiscal year, there are at least four Board Meetings are held by The Board and more if
necessary. The purpose of the meeting is to make strategic plans for the Managers in the
financial year as well as to meet important partners to develop sustainable economic relations.
The non-executive directors also hold meeting, once per year or more, that without
management's presence to review the efficiency of the latter in achieving goals or to discuss
any other relevant issues.
Board sub-committees
There are six board committees that were established to support the Board in carrying out
its duties are:
The Board Executive Committee;
The Board Audit Committee;
The Board Compensation and Industrial Relations Committee;
The Board Nominating Committee;
The Board Safety and Risk Committee; and
The Customer Experience and Technology Committee
1.2. Analysis
Agency theory
Singapore Airlines’ Board of Manager state that their main responsibility is “enhancing
shareholder value”. Besides, in the Board, the amount of independent director account 90%
members of Board. The relationship between BOD and BOM so independent and separate, and
the power of Shareholder is very strong, they have the ability to appoint Manager, plan
strategies, organize meetings and monitor BOM activities and performance. This role is in
agreement with the Agency theory that “the firm’s owners (principals) hire managers (agents)
and then delegate the firm’s day-to-day operating decisions to these managers”. “The theory
assumes that both parties – owners and managers - seek to maximize their own personal
interests”. The theory of the Agency identifies corporate governance mechanisms, particularly
the board of directors, as an important means of monitoring to guarantee that senior executives
behave in shareholders' best interests (Panda & Leepsa, 2017). Moreover, the structure of
Board composition in Singapore Airlines have enough condition of Agency Theory such as:
Strong, independent boards of directors; CEO and board chairman to be different persons;
Outside/Non-executive directors advocated; Important role for Audit and Remuneration
Committees.
Type of Board Structure: Unitary/one-tier board
The structure of Singapore Airlines’ Board could be demonstrated by following map
In the Board Composition have 8 Non-executive/Independent members and 1 Executive
/Non-Independent member named Goh Choon Phong who is the Chief Executive Officer
(“CEO”) of the Company. So, it has both executive directors, and non-executive directors as
the description of Unitary structure, that is similar with Unitary definition (Tan, September 1,
2011). Moreover, this Board is elected by Shareholder and responsible for protect the interest
of Shareholder.
The independent
Singapore Airlines guarantee their independent of Board composition by separate the
duties of Chairman and CEO. There are eighttoutoof nine Directors that are independent from
Management and the Company’s substantial shareholder. There is a strong separation of
powers between Chairman and CEO to ensure a balance of rights and responsibilities as well
as the interests of the parties in the company. Mr. Peter Seah as Chairman of Singapore Airlines
plays a role in promoting, communicating and conveying ideas to represent shareholders, as
well as managing BOD annual meetings . The drive of the Company was led by Peter to attain
and sustain a high corporate governance standard with complete assistance from the Secretary
of Directors, Management and Company. Concerning about CEO - Mr Goh Choon Phong, with
the assistant of the Management Committee, he makes strategic proposals to the Board and
supervises the implementation of choices of the Board (SingaporeAirlines, 2018/2019). He also
responsible for overseeing the application and actions of the company's corporate and company
strategies and policies.
Conclusion
This corporate governance essay carefully analyzed the corporate governance system of
Singapore Airlines and examined the strengths and weaknesses based on that structure. The
article then came up with some preliminary conclusions about the theory and structure that
Singapore Airlines is using, which is Agency theory and Unitary structure. From certain
insights, the article recommends solutions and ways to help improve corporate governance of
Singapore Airline. However, overall, this airline has a complete and efficient operation.
(1573 words)
References
Singapore Airlines. (2018/2019). ANNUAL REPORT FY2018/19.
<https://www.singaporeair.com/en_UK/us/about-us/information-for-investors/annual-
report/>
Chen, C., 2016. Solving the puzzle of corporate governance of state-owned enterprises: The
path of the Temasek model in Singapore and lessons for China. Nw. J. Int'l L. & Bus., 36,
p.303.
Panda, B., & Leepsa, N. M. (2017). Agency theory: Review of Theory and Evidence on
Problems and Perspectives. Indian Journal of Corporate Governance10(1) 74–95; SAGE
Publications.
<https://www.researchgate.net/publication/317321830_Agency_theory_Review_of_Theory_
and_Evidence_on_Problems_and_Perspectives.
Tan, Corinne, The One-Tier and Two-Tier Board Structures and Hybrids in Asia - Convergence
and What Really Matters for Corporate Governance (September 1, 2011). <Available at
SSRN: https://ssrn.com/abstract=2140345 or http://dx.doi.org/10.2139/ssrn.2140345>