Corporate governance best practices at all levels of the company

Corporate governance best practices at all levels of the company

Corporate governance best practices at all levels of the company

In business today, robust corporate governance isn’t just a box that business owners and boards must tick; it’s a strategic imperative that fuels operational excellence and gives businesses a competitive advantage. Beyond policies on compliance, good corporate governance embodies the core ethos of an organisation, shaping its culture and ensuring transparency and accountability, which are essential for sustainable growth. Organisations that have woven corporate governance best practices into their DNA can enhance their long-term success.

In this article, we delve into the purpose of corporate governance, exploring how it goes beyond policies to become the cornerstone of effective risk management, stakeholder alignment and long-term strategic planning.

We explore the role of the board of directors in ensuring good corporate governance and how the company secretary and even employees have a role to play. Discover how a holistic approach to corporate governance, as well as maintaining a strategic partnership with company secretarial experts, can drive success in Singapore’s evolving business environment.

The purpose of corporate governance

Corporate governance is a framework of rules, practices and processes that govern how a company is directed and controlled. While corporate governance encompasses compliance and policies, its significance extends far beyond these aspects, shaping the cultural and operational fabric of an organisation.

Ngiam May Ling, Associate Director of Corporate Secretarial, BoardRoom Singapore, says one of the core roles of corporate governance is to enhance transparency and accountability in processes, reporting and decision-making. “By operating transparently, companies build trust among stakeholders, including investors, customers, employees and regulators,” says May Ling. “Organisations that consistently demonstrate transparency and accountability tend to attract long-term investors interested in sustainable growth rather than short-term gains.”

A robust corporate governance framework also leads to more effective risk management. By constantly identifying, assessing and managing risks, companies can avoid potential crises and mitigate the impact of unforeseen adverse events. This approach fortifies a company’s resilience and ability to navigate challenges.

Good corporate governance also aligns the interests of stakeholders with the company’s goals. A clear delineation of roles and responsibilities helps prevent conflicts of interest. This alignment encourages collaboration among stakeholders, driving sustainable growth and value creation.

Corporate governance should also include long-term strategic planning and goal setting. This strategic focus creates enduring value for shareholders and other stakeholders, as well as better reputations and enhanced brand value.

Another tangible benefit of effective corporate governance is enhanced investor confidence. This confidence makes it easier for companies to raise funds through equity markets, debt financing or venture capital.

Strong corporate governance plays a pivotal role in shaping organisational culture, promoting transparency and accountability, managing risks effectively, aligning stakeholder interests and enhancing investor confidence. These elements collectively contribute to sustainable growth, value creation and stakeholder trust and confidence in the long term.

Corporate governance strategy

Corporate governance strategy

Good corporate governance starts at the board level. “Several big companies that are listed on the Singapore Stock Exchange have been consistently recognised for their strong corporate governance practices,” says May Ling. “They have large and diverse boards, some up to 10 directors. The boards of these companies are also very accomplished.”

Strong, diverse boards ensure robust corporate governance through a variety of key principles and practices, including:

The business has a clearly defined framework that promotes transparency, impartiality and accountability across all functions.
Corporate governance principles are embedded in the business culture through an established set of values and the strategic appointment of experienced and diverse leadership across the organisation.
Sustainability principles are integrated with corporate governance to ensure a company’s operations align with broader ethical and societal interests. For example, a company policy on their commitment to ethical sourcing.
There are clearly defined boundaries between the responsibilities of the board and management.
The board adheres to a transparent process when recruiting and appointing directors.
The board engages in an annual formal assessment process to evaluate its effectiveness as a whole and the effectiveness of individual directors.
The business has board committees, typically an audit committee, nominating committee and remuneration committee to ensure minimum standards of corporate governance.
The process for determining the remuneration packages of board members and members of management is formal and transparent.
All shareholders are treated fairly and equally.

The SGTI: a corporate governance benchmark for businesses

Good corporate governance can also help public-listed companies score well on the Singapore Governance and Transparency Index (SGTI), a valuable benchmark for assessing corporate governance practices in Singapore. The SGTI assessment framework includes a broad range of assessment criteria, including aspects of the board such as its competencies and independence, the directors’ remuneration and how they are selected, and board responsibilities.

Beyond shareholders, corporate governance is also important to stakeholders, so the company’s relationship with other parties is also assessed under the framework.

Transparency and disclosure are also key metrics. This includes clear and comprehensive reporting of financial performance, corporate policies, governance structures and risk management practices.

Role of the board of directors

The role of the board of directors in ensuring good corporate governance

The board of directors is pivotal in setting the company’s strategic direction and ensuring that management aligns the company’s strategies with its objectives and values. This involves evaluating business plans, approving major investments, and monitoring performance against strategic goals.

The board also oversees the company’s risk management framework, ensuring that risks are identified, assessed, and appropriately managed. This includes monitoring financial, operational, legal, and reputational risks, as well as ensuring compliance with regulatory requirements and ethical standards.

Financial oversight is one such critical aspect. The financial reporting process should be supervised to uphold accuracy, transparency and compliance with accounting standards and regulations. This is often facilitated through board committees such as the audit committee.

The board is also responsible for appointing and overseeing management, ensuring they possess the necessary skills, experience and integrity to lead the company effectively.

Succession planning is another board responsibility in corporate governance. This requires the board to collaborate with the nominating committee to ensure a continuous pipeline of talented leaders for future key roles.

The board also ensures the company’s adherence to legal, regulatory and ethical standards by establishing codes of conduct and ethical guidelines for employees. The guidelines often include provisions for whistleblowing protection to safeguard the identities of whistleblowers.

These actions collectively reflect good board practices in corporate governance and underscore the importance of the board of directors in corporate governance initiatives.

In Singapore, boards of directors are expected to uphold high standards of corporate governance to protect shareholder interests, promote transparency and accountability, and contribute to the long-term success and sustainability of companies.

The role of compliance in corporate governance

Compliance plays a pivotal role in corporate governance within a company, acting as a foundational element that ensures the organisation operates within legal and ethical boundaries. This includes overseeing the development of risk management frameworks that identify, assess and manage risks effectively with a focus on compliance-related risks like know your customer (KYC), anti-money laundering (AML) and conflicts of interest (COI).

The key governance practices essential for compliance in order to maintain effective corporate governance within an organisation include:

  • Establishing guidelines for regularly reviewing and updating customer verification processes to prevent identity fraud, ensure financial integrity, and uphold the company’s reputation.
  • Defining AML policies and ensuring robust systems are in place for the monitoring of financial transactions to detect and prevent illegal activities like money laundering.
  • Setting policies for identifying, disclosing and managing conflicts of interest to ensure all decisions are made in the company’s best interest and uphold the highest ethical standards.

The role of the company secretary in corporate governance

The role of a company secretary is instrumental in establishing and maintaining good corporate governance practices.

Companies secretaries undertake the following responsibilities to foster corporate governance:

They act as a liaison between the board of directors, management, shareholders and regulatory authorities, maintaining regular communication with regulatory bodies.
They ensure company compliance with relevant laws, regulations and corporate governance standards, providing ongoing education to the board on legal updates.
A company secretary coordinates and organises board meetings. This includes preparing agendas, board packs and minutes, with a focus on accurately capturing action items for accountability.
The company secretary facilitates the directors’ access to necessary information and serves as the primary point of contact for shareholders regarding governance inquiries.
The company secretary maintains accurate and up-to-date corporate records, which are essential for demonstrating compliance and facilitating regulatory audits.
The company secretary also has the responsibility of providing training to directors on governance practices and responsibilities, contributing to overall corporate governance effectiveness.

The role of the employees in corporate governance

Employees also play a role in ensuring good corporate governance including KYC, AML and COI policies.

May Ling says employees are expected to adhere to high ethical standards. “This will contribute to a culture of integrity and trust within the organisation, which is fundamental to good corporate governance.”

At a minimum, employees can be expected to comply with policies and procedures. They should be encouraged to contribute to good corporate governance by conducting themselves ethically, supporting compliance efforts with audits and participating in compliance initiatives and programs.

Employees will need training to understand their roles and responsibilities in upholding regulatory compliance and ethical standards, including recognising potential risks and knowing how to address them. They should be encouraged to report any suspicious activities or potential conflicts of interest to the appropriate channels in the organisation, which contributes to a culture of transparency and accountability.

Partner with BoardRoom team of experts

Partner with a team of experts you can trust

Corporate governance is an important strategic component of success for all businesses. Good corporate governance enhances an organisation’s transparency and accountability, ensuring compliance. However, corporate governance best practices also foster a positive and high-performing organisational culture that can drive sustainable business growth.

It’s critical for all businesses to have a strong corporate governance strategy and for boards and management to play a key role in ensuring these measures are followed.

With a full suite of corporate secretarial services in Singapore and across the Asia-Pacific region, BoardRoom can help your business in all aspects of corporate governance.

BoardRoom also provides comprehensive support for your business’ statutory and regulatory compliance needs, including:

  • Advising on statutory and regulatory compliance obligations, ensuring accurate reporting of company or corporate structure changes to relevant authorities, and assisting with stock exchange compliance and company announcements.
  • Maintaining statutory registers, minute books and company records, and attending board and shareholder meetings while preparing minutes and resolutions.
  • Drafting and reviewing corporate governance reports, performing gap analysis of corporate governance frameworks, and enhancing governance rankings.
  • Drafting and revising the board charter and terms of reference for board committees, along with policies related to insider trading, board diversity, transactions of interest, whistleblowing, investor relations, sustainability and business ethics.
  • Conducting annual performance evaluations of the board, board committees, and individual directors, including assessing the independence of proposed independent directors.

To discover more about corporate governance and how BoardRoom can help, get in touch with the team today.

Contact BoardRoom for more information:

Ngiam May Ling

Ngiam May Ling

Associate Director of Corporate Secretarial

E: [email protected]

T: +65 6536 5355

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