Corporate governance best practices at all levels of the company

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:

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.

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.

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

Company secretaries undertake the following responsibilities to foster 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.