Board Matters
THE BOARD'S CONDUCT OF AFFAIRS
Principle:
Guidelines:
It is equally important that all directors should receive regular training, particularly on relevant new laws, regulations and changing commercial risks, from time to time.
The company should be responsible for arranging and funding the training of directors. The Board should also disclose in the company's Annual Report the induction, orientation and training provided to new and existing directors.
BOARD COMPOSITION AND GUIDANCE
Principle:
Guidelines:
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
Principle:
Guidelines:
BOARD MEMBERSHIP
Principle:
Guidelines:
BOARD PERFORMANCE
Principle:
Guidelines:
ACCESS TO INFORMATION
Principle:
Guidelines:
1 A first time director is a director who has no prior experience as a director of a listed company.
2 The term "10% shareholder" shall refer to a person who has an interest or interests in one or more voting shares in the company and the total votes attached to that share, or those shares, is not less than 10% of the total votes attached to all the voting shares in the company. "Voting shares" exclude treasury shares.
3 The term "immediate family" shall have the same meaning as currently defined in the Listing Manual of the Singapore Exchange (the "Listing Manual"), i.e. the person's spouse, child, adopted child, step-child, brother, sister and parent.
4 The term "related corporation", in relation to the company, shall have the same meaning as currently defined in the Companies Act, i.e. a corporation that is the company's holding company, subsidiary or fellow subsidiary.
5 Payments for transactions involving standard services with published rates or routine and retail transactions and relationships (for instance credit card or bank or brokerage or mortgage or insurance accounts or transactions) will not be taken into account, unless special or favourable treatment is accorded.
6 A director will be considered "directly associated" with a 10% shareholder when the director is accustomed or under an obligation, whether formal or informal, to act in accordance with the directions, instructions or wishes of the 10% shareholder in relation to the corporate affairs of the corporation. A director will not be considered "directly associated" with a 10% shareholder by reason only of his or her appointment having been proposed by that 10% shareholder.
7 The term "principal commitments" shall include all commitments which involve significant time commitment such as full-time occupation, consultancy work, committee work, non-listed company board representations and directorships and involvement in non-profit organisations. Where a director sits on the boards of non-active related corporations, those appointments should not normally be considered principal commitments.
Remuneration Matters
PROCEDURES FOR DEVELOPING REMUNERATION POLICIES
Principle:
Guidelines:
LEVEL AND MIX OF REMUNERATION
Principle:
Guidelines:
DISCLOSURE ON REMUNERATION
Principle:
9 Every company should provide clear disclosure of its remuneration policies, level and mix of remuneration, and the procedure for setting remuneration, in the company's Annual Report. It should provide disclosure in relation to its remuneration policies to enable investors to understand the link between remuneration paid to directors and key management personnel, and performance.Guidelines:
The annual remuneration report should include the aggregate amount of any termination, retirement and post-employment benefits that may be granted to directors, the CEO and the top five key management personnel (who are not directors or the CEO).
In addition, the company should disclose in aggregate the total remuneration paid to the top five key management personnel (who are not directors or the CEO).
As best practice, companies are also encouraged to fully disclose the remuneration of the said top five key management personnel.
8 The term "key management personnel" shall mean the CEO and other persons having authority and responsibility for planning, directing and controlling the activities of the company.
Accountability and Audit
ACCOUNTABILITY
Principle:
Guidelines:
RISK MANAGEMENT AND INTERNAL CONTROLS
Principle:
Guidelines:
The Board should also comment in the company's Annual Report on whether it has received assurance from the CEO and the CFO:
AUDIT COMMITTEE
Principle:
Guidelines:
INTERNAL AUDIT
Principle:
Guidelines:
9 The Board may wish to refer to the sample terms of reference contained in the Guidebook for Audit Committees in Singapore issued by the Audit Committee Guidance Committee which was established on 15 January 2008 by the Monetary Authority of Singapore, the Accounting and Corporate Regulatory Authority and Singapore Exchange Limited to develop practical guidance for audit committees of listed companies.
Shareholders Rights and Responsibilities
SHAREHOLDER RIGHTS
Principle:
Guidelines:
COMMUNICATION WITH SHAREHOLDERS
Principle:
Guidelines:
CONDUCT OF SHAREHOLDER MEETINGS
Principle:
Guidelines:
Glossary
The following terms, unless the context requires otherwise, have the following meanings:
Term | Meaning | |
"AC" | : | Audit Committee |
"AC Chairman" | : | Chairman of the AC |
"Board" | : | The board of directors of the company |
"CEO" | : | Chief executive officer or equivalent |
"CFO" | : | Chief financial officer or equivalent |
"Chairman" | : | Chairman of the Board |
"Companies Act" | : | Companies Act (Chapter 50 of the statutes of Singapore) |
"directly associated" | : | A director will be considered "directly associated" to a 10% shareholder when the director is accustomed or under an obligation, whether formal or informal, to act in accordance with the directions, instructions or wishes of the 10% shareholderin relation to the corporate affairs of the corporation. A director will not be considered "directly associated" to a 10% shareholder by reason only of his appointment having been proposed by that 10% shareholder |
"immediate family" | : | As currently defined in the Listing Manual, to mean the person's spouse, child, adopted child, step-child, brother, sister and parent |
"key management personnel" | : | The CEO and other persons having authority and responsibility for planning, directing and controlling the activities of the company |
"Listing Manual" | : | The listing manual of the Singapore Exchange |
"Management" | : | The management of the company |
"NC" | : | Nominating Committee |
"NC Chairman" | : | Chairman of the NC |
"principal commitments" | : | Includes all commitments which involve significant time commitment such as full-time occupation, consultancy work, committee work, non-listed company board representations and directorships and involvement in non-profit organisations. Where a director sits on the Boards of non-active related corporations, those appointments should not normally be considered principal commitments |
"related corporation" | : | In relation to the company, as currently defined in the Companies Act, to mean a corporation that is the company's holding company, subsidiary or fellow subsidiary |
"RC" | : | Remuneration Committee |
"RC Chairman" | : | Chairman of the RC |
"10% shareholder" | : | A person who has an interest or interests in one or more voting shares in the company; and the total votes attached to that share, or those shares, is not less than 10% of the total votes attached to all the voting shares in the company. "Voting shares" exclude treasury shares |
Reference to any gender shall include reference to any other gender, unless the context otherwise requires
Disclosure of Corporate Governance Arrangements
The Listing Manual requires listed companies to describe in their company's Annual Reports their corporate governance practices with specific reference to the principles of the Code, as well as disclose and explain any deviation from any guideline of the Code. Companies should make a positive confirmation at the start of the corporate governance section of the company's Annual Report that they have adhered to the principles and guidelines of the Code, or specify each area of non-compliance. Many of these guidelines are recommendations for companies to disclose their corporate governance arrangements. For ease of reference, the specific principles and guidelines in the Code with express disclosure requirements are set out below:
• Delegation of authority, by the Board to any board committee, to make decisions on certain board matters | Guideline 1.3 |
• The number of meetings of the Board and board committees held in the year, as well as the attendance of every board member at these meetings | Guideline 1.4 |
• The type of material transactions that require board approval under guidelines | Guideline 1.5 |
• The induction, orientation and training provided to new and existing directors | Guideline 1.6 |
• The Board should identify in the company's Annual Report each director it considers to be independent. Where the Board considers a director to be independent in spite of the existence of a relationship as stated in the Code that would otherwise deem a director not to be independent, the nature of the director's relationship and the reasons for considering him as independent should be disclosed | Guideline 2.3 |
• Where the Board considers an independent director, who has served on the Board for more than nine years from the date of his first appointment, to be independent, the reasons for considering him as independent should be disclosed. | Guideline 2.4 |
• Relationship between the Chairman and the CEO where they are immediate family members | Guideline 3.1 |
• Names of the members of the NC and the key terms of reference of the NC, explaining its role and the authority delegated to it by the Board | Guideline 4.1 |
• The maximum number of listed company board representations which directors may hold should be disclosed | Guideline 4.4 |
• Process for the selection, appointment and re-appointment of new directors to the Board, including the search and nomination process | Guideline 4.6 |
• Key information regarding directors, including which directors are executive, non-executive or considered by the NC to be independent | Guideline 4.7 |
• The Board should state in the company's Annual Report how assessment of the Board, its board committees and each director has been conducted. If an external facilitator has been used, the Board should disclose in the company's Annual Report whether the external facilitator has any other connection with the company or any of its directors. This assessment process should be disclosed in the company's Annual Report | Guideline 5.1 |
• Names of the members of the RC and the key terms of reference of the RC, explaining its role and the authority delegated to it by the Board | Guideline 7.1 |
• Names and firms of the remuneration consultants (if any) should be disclosed in the annual remuneration report, including a statement on whether the remuneration consultants have any relationships with the company | Guideline 7.3 |
• Clear disclosure of remuneration policies, level and mix of remuneration, and procedure for setting remuneration | Principle 9 |
• Remuneration of directors, the CEO and at least the top five key management personnel (who are not also directors or the CEO) of the company. The annual remuneration report should include the aggregate amount of any termination, retirement and post-employment benefits that may be granted to directors, the CEO and the top five key management personnel (who are not directors or the CEO) | Guideline 9.1 |
• Fully disclose the remuneration of each individual director and the CEO on a named basis. There will be a breakdown (in percentage or dollar terms) of each director's and the CEO's remuneration earned through base/fixed salary, variable or performance-related income/bonuses, benefits in kind, stock options granted, share-based incentives and awards, and other long-term incentives | Guideline 9.2 |
• Name and disclose the remuneration of at least the top five key management personnel (who are not directors or the CEO) in bands of S$250,000. There will be a breakdown (in percentage or dollar terms) of each key management personnel's remuneration earned through base/fixed salary, variable or performance-related income/bonuses, benefits in kind, stock options granted, share-based incentives and awards, and other long-term incentives. In addition, the company should disclose in aggregate the total remuneration paid to the top five key management personnel (who are not directors or the CEO). As best practice, companies are also encouraged to fully disclose the remuneration of the said top five key management personnel | Guideline 9.3 |
• Details of the remuneration of employees who are immediate family members of a director or the CEO, and whose remuneration exceeds S$50,000 during the year. This will be done on a named basis with clear indication of the employee's relationship with the relevant director or the CEO. Disclosure of remuneration should be in incremental bands of S$50,000 | Guideline 9.4 |
• Details and important terms of employee share schemes | Guideline 9.5 |
• For greater transparency, companies should disclose more information on the link between remuneration paid to the executive directors and key management personnel, and performance. The annual remuneration report should set out a description of performance conditions to which entitlement to short-term and long-term incentive schemes are subject, an explanation on why such performance conditions were chosen, and a statement of whether such performance conditions are met | Guideline 9.6 |
• The Board should comment on the adequacy and effectiveness of the internal controls, including financial, operational, compliance and information technology controls, and risk management systems The commentary should include information needed by stakeholders to make an informed assessment of the company's internal control and risk management systems The Board should also comment on whether it has received assurance from the CEO and the CFO: (a) that the financial records have been properly maintained and the financial statements give true and fair view of the company's operations and finances; and (b) regarding the effectiveness of the company's risk management and internal control systems | Guideline 11.3 |
• Names of the members of the AC and the key terms of reference of the AC, explaining its role and the authority delegated to it by the Board | Guideline 12.1 |
• Aggregate amount of fees paid to the external auditors for that financial year, and breakdown of fees paid in total for audit and non-audit services respectively, or an appropriate negative statement | Guideline 12.6 |
• The existence of a whistle-blowing policy should be disclosed in the company's Annual Report | Guideline 12.7 |
• Summary of the AC's activities and measures taken to keep abreast of changes to accounting standards and issues which have a direct impact on financial statements | Guideline 12.8 |
• The steps the Board has taken to solicit and understand the views of the shareholders e.g. through analyst briefings, investor roadshows or Investors' Day briefings | Guideline 15.4 |
• Where dividends are not paid, companies should disclose their reasons. | Guideline 15.5 |
The Role of Shareholders in Engaging with Companies in which they Invest
The Code on Corporate Governance focuses on providing principles and guidelines to listed companies and their Boards to spur them towards a high standard of corporate governance. To ensure that these standards are achieved and sustained in practice, active and constructive shareholder relations is crucial. Bearing in mind the diversity of shareholders in a listed company and their differing investment objectives, this statement sets out certain broad views on the role of shareholders.
The objective of creating sustainable and financially sound enterprises that offer long-term value to shareholders is best served through a constructive relationship between shareholders and the Boards of companies.
Shareholder inputs on governance matters are useful to strengthen the overall environment for good governance policies and practices, and convey shareholders' expectations to the Board. By constructively engaging with the Board, shareholders can help to set the tone and expectation for governance of the company.
A shareholder's vote at general meetings is a direct way of expressing views and expectations to the Board. Hence, shareholders should exercise their right to attend general meetings and vote responsibly. Where relevant, shareholders should communicate to the Board their reasons for disagreeing with any proposal tabled at a general meeting.
Where appropriate, specific shareholder groups and their associations are encouraged to consider adopting international best practices. Initiatives by relevant industry associations or organisations to develop guidelines on their roles as shareholders of listed companies will be welcomed.
For the avoidance of doubt, this statement does not form part of the Code of Corporate Governance. It is aimed at enhancing the quality of engagement between shareholders and companies, so as to help drive higher standards of corporate governance and improve long-term returns to shareholders.