News Analysis

Corporate governance in Singapore needs to be better

by Dan Byrne on Sep 16, 2022

Corporate governance in Singapore has improved over the last six years, but gaps remain, KPMG has said.

The prominent global accounting firm has taken a deep dive into the landscape of disclosure in one of the most important Asian economies. What it has found spells good news on one level and worries on another. 

The research has found that while Singapore-based companies are broadly compliant with the need to report, they aren’t so interested in what they’re reporting.

The positive findings

KPMG’s last deep dive into the corporate governance workings of Singapore was in 2016. The six-year comparison has shown that the country’s biggest stride was in the presence of reports from companies. 

More are now complying fully with disclosure requirements, and recent changes in local rules may have helped that. 

In 2018, the government made significant changes to the country’s corporate governance code. It broadened disclosure criteria, set quotas for independent directors, and lowered the threshold for what’s considered a “substantial shareholder” to 5% of shares – down from 10%. 

KPMG’s report considers that this new code, which became fully operational this year, has Now “made it easier for companies to comply” with the expected corporate governance standards.

The negative findings

What Singapore has gained in activity, it still lacks in substance, KPMG suggested. 

The report highlights that the quality of disclosures still leaves much to be desired in most cases. In other words, firms report, but what they say is often not much use. 

“We continue to see disclosures which are not as forthcoming,” it warned. 

It drew particular attention to the fact that just 5% of companies gave full details on remuneration to directors and executives. Most disclosures in this area were nothing more than “boilerplate” content, i.e. words that look more like a template than a full explanation. 

They used the same tactic in board structure, often disclosing specific actions and appointments but not providing a sufficient reason for them. 

“Companies often mention that the board and nominating committee have reviewed the independence of the director in character and judgement and deemed them independent. But very few companies provided details on the process used to form their conclusion,” the report said. 

Other areas that have seen this issue include. 

  • Diversity: firms claim to be committed in principle but set no tangible targets. 
  • Dividend policies: 70% did not have a formal policy in this area and did not fully explain why.

What is the complete corporate governance picture in Singapore?

The country is not in or near the top ten worldwide for corporate governance, according to Saharating’s World Corporate Governance Index. Still, it does place within the top 50 out of 200 jurisdictions—so overall, not the best but nowhere near terrible. 

According to the Institute for Singapore Chartered Accountants, Singapore ultimately boasts a solid corporate governance reputation, and lawmakers have made efforts to strengthen their grip on boards and executives. 

However, the country is not immune to scandals. There have been multiple cases of absconding CEOs covered by sub-par reporting, such as Apple reseller Epicentre or hedge fund Three Arrows Capital.  

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