Developments, Structures, Capacity & Roadmap For Enhancing CG

– Governance Standards In Singapore
Kala Anandarajah Partner, Rajah & Tann 17 June 2006

1
© 2006 Kala Anandarajah, Partner, Rajah & Tann – kala.anandarajah@rajahtann.com & 65-62321111

2
© 2006 Kala Anandarajah, Partner, Rajah & Tann – kala.anandarajah@rajahtann.com & 65-62321111

Corporate Governance = Increased Costs!!

So Ignore??

3
© 2006 Kala Anandarajah, Partner, Rajah & Tann – kala.anandarajah@rajahtann.com & 65-62321111

People & Scandals
• • • • • • Kenneth Lay Andrew Fastow / Jeffrey Skilling - Enron Jack Grubman – Citigroup Gary Winnick – Global Crossing Richard Grasso – NYSE Etc Etc

Relevance for Maldives? For Singapore? For Other Commonwealth countries?

4
© 2006 Kala Anandarajah, Partner, Rajah & Tann – kala.anandarajah@rajahtann.com & 65-62321111

Rajah & Tann – kala. Partner. resulting in Combined Code – 2003 • US: – Sarbanes-Oxley 2002 – NYSE CG Rules – 4 November 2003 • Singapore: – Code of Corporate Governance – 2001 – Changes to Listing Manual – 2002 – Consultation Paper – December 2004 – New Code – July 2005 – In force 1 Jan 2007 – Listing Manual • Malaysia: – Code of Corporate Governance – 2000 – Changes to Listing Manual – 2001.anandarajah@rajahtann.com & 65-62321111 . 2003 • Australia: – Code of Corporate Governance – 2003 5 © 2006 Kala Anandarajah.History • UK: – Cadbury Report – 1992 – Hampel Report (Combined Code) – 1998 – Directors’ Remuneration Report Regulations – 2002 – Higgs & Smith Reports.

Partner. Rajah & Tann – kala.anandarajah@rajahtann. 6 © 2006 Kala Anandarajah. corporations and society.Definition Sir Adrian Cadbury: CG is holding the balance between economic and social goals and between individual and communal goals. The incentive for states is to strengthen their economics and discourage fraud and mismanagement. The aim is to align as nearly as possible the interests of individuals.com & 65-62321111 . The governance framework is there to encourage the efficient use of resources and equally to require accountability for the stewardship of those resources. The incentive to corporations is to achieve their corporate aims and to attract investment.

com & 65-62321111 . Partner. but nation building. or even economic well-being.anandarajah@rajahtann. PM Lee 24th October 2004 7 © 2006 Kala Anandarajah. It is about creating an inclusive society where citizens not merely enjoy economic wealth. but feel a sense of ownership and belonging.Definition End goal of any [public] governance system is not institutional strength. Rajah & Tann – kala.

they involve the following: At a minimum. Partner. Governance involves • organisational structures and rules of conduct • that acts as a check on insiders misusing their position or knowledge against the interest of other stakeholders The idea is to have GOAL POSTS And for public governance = The essence of good governance is a balance between achieving social mission and maintaining accountability 8 © 2006 Kala Anandarajah.com & 65-62321111 .anandarajah@rajahtann.Definition But in either case. Rajah & Tann – kala.

com & 65-62321111 .G Summarised R = Responsibility A = Accountability F = Fairness T = Transparency RAFT contributes to effectiveness! 9 © 2006 Kala Anandarajah. Rajah & Tann – kala.anandarajah@rajahtann. Partner.

How To Achieve Structures & processes of The Right Information The Right People People The Right Culture Disclosure.com & 65-62321111 .anandarajah@rajahtann. Transparency & Communication The Right Processes 10 © 2006 Kala Anandarajah. Partner. Rajah & Tann – kala.

Partner.anandarajah@rajahtann. Rajah & Tann – kala.IMPORTANT NOTE • Need for dynamism and flexibility • Recognise differences in: – Types of organisations – Size – Nature of business – Culture – Different governance structures – Different legal and regulatory jurisdictions 11 © 2006 Kala Anandarajah.com & 65-62321111 .

Broad Framework Of Corporate Governance In Singapore .

Broad Framework • Financial & Capital Markets – Begun in late 1960s – Over 500 local and foreign financial institutions with wide range of financial services – One of the largest capital markets – over 600 companies listed – Demutualised markets • Sources of Law – Statute – Case Law • Regulators – Monetary Authority of Singapore – Accounting & Corporate Regulatory Authority – Council on Corporate Disclosure & Governance 13 © 2006 Kala Anandarajah. Partner. Rajah & Tann – kala.anandarajah@rajahtann.com & 65-62321111 .

Rajah & Tann – kala.anandarajah@rajahtann.com & 65-62321111 .Other Key Agencies • Singapore Institute of Directors • Singapore Association of the Institute of Chartered Secretaries and Administrators • Institute of Certified Public Accountants of Singapore • Association of Chartered Accountants • Securities Investors Association of Singapore 14 © 2006 Kala Anandarajah. Partner.

Major Initiatives To Enhance Corporate Governance .

Partner. Rajah & Tann – kala.anandarajah@rajahtann.com & 65-62321111 .Key Initiatives • • • • • • Board matters Other key Changes affecting Directors Disclosure. Transparency. Audit Shareholders Small companies Whistleblowing 16 © 2006 Kala Anandarajah.

com & 65-62321111 . Partner. Rajah & Tann – kala.Board Matters • Independent Directors: – Number – Definition – Mandating continuity of at least two independent directors • Chairman v CEO • Selection and appointment of directors – DISCLOSURE • Roles of Board / Board members – Chairman – Non-Executive Directors – Management • Training – Requirement – Statement of director’s prior experience • Board committees 17 © 2006 Kala Anandarajah.anandarajah@rajahtann.

Rajah & Tann – kala.Someone Who Can Do The Job… ‘Without Fear or Favour.anandarajah@rajahtann. Partner. Affection or Ill-will’ 18 © 2006 Kala Anandarajah.com & 65-62321111 .

Directors • • • • • • Confirmation that directors have been informed of obligations Director declaration when consenting to act as director Directors can rely on others Appointment of compliance advisers Problems with nominee directors Rising influence of business judgment 19 © 2006 Kala Anandarajah.Other Changes . Rajah & Tann – kala.anandarajah@rajahtann. Partner.com & 65-62321111 .

Disclosure. Partner. Transparency. Rajah & Tann – kala. Accounts • Financial statements to comply with Accounting Standards • Non-financial statements: – Compliance with CG measures implemented – Director remuneration – Companies operating procedure – Risk management concerns • Confirmation of approvals (when 1st listing) • Negative assurance of interim results • Auditor independence 20 © 2006 Kala Anandarajah.com & 65-62321111 .anandarajah@rajahtann.

anandarajah@rajahtann. Partner.com & 65-62321111 . Rajah & Tann – kala.Shareholders • Electronic participation • Resolutions on substantially separate issues to be kept separate • Requirement for effective shareholder remedies 21 © 2006 Kala Anandarajah.

anandarajah@rajahtann. Rajah & Tann – kala. raise concerns about possible improprieties in matters of financial reporting or other matters 22 © 2006 Kala Anandarajah.com & 65-62321111 . in confidence.review arrangements by which staff of the company may.Other Changes • Laws for small businesses – Removal of requirement to file audits – Removal of need to hold AGMs – One-director companies – but separate shareholder • Whistle-blowing – Audit Committee . Partner.

Key Gaps / Analysis Of Needs .

com & 65-62321111 .anandarajah@rajahtann. Partner.Issues • • • • • • Family owned and state owned corporations Newly opening up markets Rules v enforcement Shareholder rights and equitable treatment Role of government State of economy 24 © 2006 Kala Anandarajah. Rajah & Tann – kala.

Why Is This Important .

com & 65-62321111 .Benefits • Financial Benefits – Lower cost of capital – Access to international capital markets – Longer term investors + better relationships – Better risk management and internal controls – reduction of slippage – Control rising cost of D&O insurance • Commercial Benefits – Preferred supplier – Increased faith • Human resource benefits – Strengthen employer-employee relationships – Attract better talent – Greater chances of finding good independent lawyers 26 © 2006 Kala Anandarajah.anandarajah@rajahtann. Partner. Rajah & Tann – kala.

Structures & Processes .

Partner. Rajah & Tann – kala.Tenets For Successful Governance • Must have at its core a set of principles and values that are: • • Enduring Relevant to the people living in that society 28 © 2006 Kala Anandarajah.anandarajah@rajahtann.com & 65-62321111 .

Rajah & Tann – kala. Partner.anandarajah@rajahtann.Illustration From Singapore • PM Lee identified the following four: • • • • Leadership is key Anticipate change and stay relevant Reward for work and work for reward Stake for everyone and opportunities for all Build CG through basic essentials 29 © 2006 Kala Anandarajah.com & 65-62321111 .

Rajah & Tann – kala.anandarajah@rajahtann. Partner.com & 65-62321111 .Sample Of Principles Applicable Across Countries • Integrity of public service corporate service • • Avoid waste and excesses Ensure financial soundness of systems being managed • • Avoidance of Asian financial crisis Therefore adopt international standards • Put in systems of internal control and checks and balances 30 © 2006 Kala Anandarajah.

Rajah & Tann – kala.anandarajah@rajahtann.com & 65-62321111 .Essential Structural Reqt = Laws & Enforcement • Essential to have requisite laws: • Promote ethics and integrity: • Governance & Compliance • Prevention of Corruption Act • Anti-Moneylaundering (legislation and codes) • Effective enforcement necessary • Regulators awareness and coordination • Speedy enforcement mechanism • Alternative mechanisms to courts • All to be treated equally under the laws 31 © 2006 Kala Anandarajah. Partner.

Concluding Words .

Rajah & Tann – kala.anandarajah@rajahtann.Recurrent Themes • Culture • Integrity • Courage 33 © 2006 Kala Anandarajah. Partner.com & 65-62321111 .

Rajah & Tann – kala.Culture International Bodies Government Business Environment School Family Individual 34 © 2006 Kala Anandarajah.anandarajah@rajahtann. Partner.com & 65-62321111 .

but one must take it because it is RIGHT. nor politic. Rajah & Tann – kala." 35 © 2006 Kala Anandarajah.anandarajah@rajahtann. Partner.is it safe? • Expediency asks the question -. nor popular.is it popular? • But conscience asks the question -.A Better Way to Think About Business The Meaning of integrity • "Cowardice asks the question -.com & 65-62321111 .is it politic? • Vanity asks the question -.is it right? • And there comes a time when one must take a position that is neither safe.

anandarajah@rajahtann. Rajah & Tann – kala. Partner.com & 65-62321111 .IMPORTANT NOTE • Need for dynamism and flexibility • Recognise differences in: – Types of organisations – Size – Nature of business – Culture – Different governance structures – Different legal and regulatory jurisdictions 36 © 2006 Kala Anandarajah.

Partner. But they are far less than the long range risks of comfortable inaction. Rajah & Tann – kala.Is Silence Good?? There are risks and costs to action.com & 65-62321111 .John F.anandarajah@rajahtann. . Kennedy 37 © 2006 Kala Anandarajah.

com & 65-62321111 .anandarajah@rajahtann.Corporate Governance Compliance 2003 38 © 2006 Kala Anandarajah. Rajah & Tann – kala. Partner.

Corporate Governance Compliance 2003 39 © 2006 Kala Anandarajah.com & 65-62321111 . Rajah & Tann – kala. Partner.anandarajah@rajahtann.

40 © 2006 Kala Anandarajah. Rajah & Tann – kala. Partner.com & 65-62321111 .anandarajah@rajahtann.

com 41 © 2006 Kala Anandarajah. Partner. Rajah & Tann – kala.anandarajah@rajahtann.anandarajah@rajahtann.Apologies!! For materials: Email: kala.com & 65-62321111 .

Sign up to vote on this title
UsefulNot useful