In recent years, the COVID-19 pandemic has reshaped the corporate landscape of markets the world over. For businesses, survival has meant adapting to a new level of uncertainty and change. As we start to emerge from the pandemic stronger and better, Asia-Pacific businesses are pursuing corporate governance so that they will thrive while being in compliance with all applicable laws, rules and regulations.
Read on as Samatha Tai, Regional Managing Director, Corporate Secretarial, delves into the significance of corporate governance in Singapore, and explains how business executives can use values-driven governance approaches to ensure positive results. We will also examine the crucial role of the company secretary in guiding and managing contemporary corporate governance initiatives.
What is corporate governance?
Within an organisation, the meaning of corporate governance is to enhance performance, maintain operational integrity and maximise value for all stakeholders. Businesses that successfully meet corporate governance standards are better positioned to accomplish their objectives, secure investment and outshine competitors.
Furthermore, company-wide corporate governance can help mitigate the risk of misconduct, therefore protecting a business from penalisation.
“Under the Prevention of Corruption Act and related legislation, Singapore’s Corrupt Practices Investigation Bureau has the power to investigate corruption, money laundering and bribery, and take measures to deter and punish offenders,” Samantha says. “So businesses need to ensure they have suitable procedures in place.”
Samantha goes on to say, “While compliance with the Code of Corporate Governance is not mandatory in Singapore, its alignment with fiduciary duty makes it a vital investment for any leader. Fiduciary duty is taken very seriously. Regulators take swift action against directors – including independent directors – who fail to fulfil their duties.”
A successful corporate governance framework would include:
- the creation of customised policies; and
- company-wide compliance with those policies.
Stewardship of this function usually resides with the board of directors of a company, with the company secretary playing a critical ancillary role.
How company secretaries support good governance
Historically, the company secretary performed a largely administrative role. Today, the company secretary performs a vast range of important responsibilities in their capacity as a statutory officer. This includes serving as the nexus between the board of directors, senior management and stakeholders (including regulatory bodies).
Broadly, company secretaries support the board of directors and executive management with:
- Board practices
- Regulatory and legal compliance
- Shareholder relations
- Subsidiary management
They also assist with the adoption of digital technologies, such as board management and ESG software, to strengthen corporate governance while also improving board and shareholder processes.
Samantha explains that the current role of the company secretary is detailed in the Code of Corporate Governance.
“In Singapore, the advice of the company secretary on corporate governance issues is sought because they attend all board meetings, know the applicable policies and understand compliance obligations,” she says. “They are able to recommend corporate governance processes that need to be put in place. This could relate to board structure or the company’s policies and code of ethics, for example.”
A company secretary’s thorough knowledge of laws, rules and regulations means they can ensure corporate governance standards are complied with.
It is worth noting that the role of the company secretary in corporate governance has become so significant that the UK’s Institute of Company Secretaries and Australia’s Institute of Chartered Secretaries and Administrators have both rebranded to the ‘Chartered Governance Institute’ to reflect this.
Ways to elevate your corporate governance
Good corporate governance is set to become increasingly important in the coming years. Regulators are highly likely to introduce new recommendations for both public and private entities. Companies that continue to meet best-practice standards as they expand will be in a strong position to seize new opportunities and respond to market demands.
By taking these four steps, you can lead your organisation towards exceptional corporate governance.
1. Appoint a skilled company secretary in Singapore
To begin, make sure your business complies with current regulatory rules and applies best practices, particularly those described in the Code of Corporate Governance (The Code). This also means adapting to meet new standards as they are introduced.
“The Code aims to promote high levels of corporate governance in Singapore by putting forth Principles of good corporate governance and Provisions with which companies are expected to comply”.
To satisfy this requirement, a qualified and experienced company secretary would assist with the establishment of a group-wide framework for corporate governance. The framework would include a code of conduct, as well as policies and procedures for corporate governance issues such as whistleblowing, anti-corruption, board diversity and sustainability.
Company secretaries help uphold corporate governance by:
- Staying up to date with evolving standards
- Ensuring compliance
- Carrying out gap analyses
- Advising on best practices
Because of this, outsourcing your Company secretary is a popular choice for business leaders who wish to receive specialist advice that’s tailored for their organisation.
2. Develop comprehensive, customised policies
Due to Singapore’s demanding workloads at a senior level, companies can be tempted to resort to cookie-cutter solutions when creating their corporate governance policies.
“But there is a whole lot more to corporate governance than just policy creation,” Samantha warns. “For corporate governance frameworks to work, you have to have intimate knowledge of the workings of your organisation and the mechanism of the Code of Corporate Governance.”
Effective corporate governance policies:
- are detailed and exhaustive;
- reflect organisational values;
- suit the organisation’s size and industry; and
- explain how good governance is applied in practical contexts.
3. Use integrated reporting
While it is important that your corporate governance policies and reports are up to standard, good governance cannot be accomplished on paper alone. Samantha suggests that integrated reporting is likely to become mandatory in the years ahead.
“Integrated reporting is a process founded on integrated thinking which espouses communicating how a company’s governance, strategy, performance and prospects can support value creation,” Samantha says. “It adds significance to your annual report.”
Adopting integrated reporting allows for better employee and shareholder engagement, as well as enhanced value creation – two major benefits that are difficult to achieve when looking at reporting as a mere compliance exercise.
All members of an organisation are responsible for pursuing good governance, so it is also important to demonstrate its value to board members and employees. You can do this by explaining how corporate governance practices are vital tools for improving company performance, rather than arbitrary obligations that must be fulfilled.
“Effective corporate governance is embedded into the daily operations of a company,” Samantha says. “It’s not just a compliance policy.”
4. Embed and emphasise ESG in your organisational culture
By aligning your company’s culture with its Environmental, Social and Governance (ESG) initiatives, you can help employees better understand the concept of corporate governance and their role in it.
An external ESG professional can help you communicate key messages, maintain a timely ESG reporting schedule and ultimately build a constructive company culture.
Due to the current world economic climate, many business leaders are so focused on navigating a challenging economy that they tend to neglect ESG matters.
“But remember, the ‘social’ element of ESG is about your staff,” Samantha says. “At the end of the day, taking care of your people will impact your profitability positively.”
To promote top-down corporate governance, regulators are now encouraging greater board involvement in ESG practices. Standards for these practices also continue to evolve on a country-specific basis.
Keep in mind that board directors are ultimately responsible for mitigating ESG risks and making decisions that increase shareholder value. For this reason, it is critical that businesses establish an extensive ESG strategy that benefits all members of the organisation – including its shareholders and employees – and the environment.
Start implementing good governance practices today
In summary, the effectiveness of your corporate governance practices will determine your business success in the years to come.
As such, it is important that your board members and executive teams help drive the development and implementation of your governance framework. They should also be supported by a company secretary who shares their organisational values.
A good company secretary is one that offers diverse knowledge, strong ethical guidance, sound judgement and excellent communication skills.
Having a reliable company secretary managing your corporate governance also enables your executive staff to focus on other pressing business objectives, such as taking your company digital.
Contact BoardRoom’s corporate secretarial experts to find out how we can help your business achieve its governance goals.
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