Whole Section

  • Report of the Committee and Code of Corporate Governance

    21 March 2001
    SINGAPORE

    Introduction

    1 Corporate governance refers to the processes and structure by which the business and affairs of the company are directed and managed, in order to enhance long term shareholder value through enhancing corporate performance and accountability, whilst taking into account the interests of other stakeholders. Good corporate governance therefore embodies both enterprise (performance) and accountability (conformance).
    2 There is, however, no conclusive evidence that any one model of corporate governance leads to superior corporate performance. This is because the appropriate governance model will vary not only between companies but also over time for any individual company. This is particularly so given the speed with which new companies are forming and the fundamental changes to corporate structures being wrought by new technologies and globalisation. These changes will result in quite different models of corporate governance emerging from those to which we are accustomed.
    3 Nevertheless, good corporate governance matters, especially in situations where there may be significant conflicts of interests between shareholders and Management, such as in certain corporate acquisitions; management buyouts; financial reporting; performance appraisal, hiring and replacement of senior management; and executive compensation. Investors, especially international institutional investors, increasingly demand high corporate governance standards in companies that they invest in.
    4 In a recent McKinsey Investor Opinion Survey of 200 institutional investors, 89 percent of respondents in Asia said that they would pay more for the shares of a well-governed company than for those of a poorly governed company with comparable financial performance. The fact that a majority of investors say they already take corporate governance into account when making investment decisions is a powerful argument in favour of corporate governance reform.
    5 In addition, with the intent of improving corporate governance in a corporation and promoting enterprise and accountability, the World Bank and OECD established an Investor Responsibility Taskforce. Specifically, the Investor Responsibility Taskforce seeks to ensure that countries and companies are properly rewarded by the markets if they make governance reforms. With more than $3 trillion in assets managed by its members, its objective is to encourage investors to pay more attention to corporate governance issues so as to speed up the flow of funds to those countries and companies that make progress on the reform agenda.
    6 In Singapore, the results of the Pricewaterhouse Coopers ("PWC") Corporate Governance Survey of Institutional Investors, published in 2000, indicated that we need to continuously improve its standard of corporate governance, to provide a climate conducive to the orderly development of the capital markets and to meet the increasing expectations of investors.
    7 This Report and the accompanying Code of Corporate Governance ("Code") seeks to encourage Singapore listed companies to enhance shareholder value through good corporate governance. It is not meant to be a panacea. It, however, recognises the need to balance enterprise and accountability in creating long-term shareholder value. It allows companies flexibility in choosing its approach to corporate governance, subject to appropriate disclosure to, and approval by, shareholders. Companies must take upon themselves the responsibility for adopting governance practices best suited to their circumstances, built around sound principles. The principles and guidelines in the Code are not meant to unduly restrict corporate governance policies and practices. Each company must decide which governance practices are relevant to investor decision-making and make disclosure accordingly. The market will judge each approach as it sees fit.
    8 However, in order for shareholders to have a sound basis for making their investment decisions and to assess the appropriateness of a company's corporate governance practices, companies must provide appropriate disclosure of their corporate governance framework and practices. Such disclosures would also allow other market participants to play a more active role in promoting good corporate governance by companies.

    Alternative Approaches to Promoting Good Corporate Governance

    9 In theory, there are at least three possible regulatory approaches to promoting good corporate governance:
    1. A prescriptive approach that requires companies to adopt specific corporate governance practices;
    2. A non-prescriptive approach that allows companies to determine their own corporate governance practices, subject to appropriate disclosures of corporate governance practices that are adopted; and
    3. A balanced approach that specifies corporate governance best practices but allows companies to depart from these practices subject to appropriate disclosure.
    10 Although a prescriptive approach may be appropriate in certain circumstances, for example where capital markets are undeveloped, such an approach is inconsistent with the disclosure-based philosophy to regulation that Singapore is moving towards. Further, a prescriptive approach assumes that a "one size fits all" approach is appropriate, but as discussed earlier, what is good corporate governance is likely to vary across companies and over time.
    11 A non-prescriptive approach to corporate governance is probably best exemplified by the approach in the US. In the US, the Securities and Exchange Commission ("SEC") and the various stock exchanges generally do not prescribe corporate governance practices that companies should adopt, although some private sector bodies and major institutional investors have developed codes that embody what they consider to be good corporate governance. Instead, the SEC and the stock exchanges emphasise high disclosure standards, including disclosure of corporate governance practices that companies have adopted, so that investors can assess the corporate governance of companies they invest in. Even in the US, however, there are instances where specific corporate governance practices are prescribed — a good example is the requirement of the New York Stock Exchange ("NYSE") and NASDAQ for listed companies to have an audit committee with at least three directors, all independent. Australia is another example of a country that has adopted a largely non-prescriptive approach. Companies listed on the Australian Stock Exchange ("ASX") are required to describe specific corporate governance practices that they have adopted, and companies are encouraged to pay attention to best practice recommendations that have been published. However, the ASX has not adopted a specific corporate governance code that companies should follow, nor does it require companies to disclose non-compliance with any particular code.
    12 A balanced approach is also followed by markets that adopt the disclosure-based philosophy to regulation. For example, the Canadian and UK markets largely follow the disclosure-based approach to regulation but have nevertheless adopted codes of corporate governance that include fairly extensive specification of corporate governance practices that companies should adopt. However, the flexibility to companies is preserved in most areas through the voluntary nature of these codes. Subject to appropriate descriptions of corporate governance practices and disclosure of non-compliance with specific provisions, companies can depart from specific provisions in the code under the Listing Rules.
    13 After careful consideration of the disclosure philosophy that Singapore is embracing, the state of development of the Singapore capital markets, and the institutional features of the corporate governance landscape (including the ownership profiles of Singapore listed companies and the activism of shareholders), the Corporate Governance Committee ("CGC" or "Committee") has decided that, at this particular time, the balanced approach adopted in markets such as the UK and Canada provide the best approach for improving corporate governance in Singapore. The Committee proposes that all companies listed on the Singapore Exchange ("SGX") be required, as a requirement in the Listing Manual, to give a complete description of their corporate governance practices with specific references to each of the guidelines set out in the Code, and where they deviate from these best practices, they should disclose these non-compliance with appropriate explanations. In CGC's view, while the SGX has the responsibility of ensuring that listed companies disclose their corporate governance practices as well as their reasons for any deviation from the Code, the quality of the explanations is for the market to assess and judge.
    14 The CGC is cognisant that companies need time to gear themselves up for the higher standards of corporate governance and disclosure, and requiring immediate compliance may result in the letter rather than the spirit of the Code being followed. Listed companies are thus required to disclose their corporate governance practices and give explanations for deviations from the Code in their annual reports for Annual General Meetings ("AGMs") held from 1 Jan 2003 onwards. However, listed companies are encouraged to comply with the Code before that, if they are able to do so.
    15 It is hoped that the companies would observe the spirit, and not just blindly follow the letter of the Code, as the latter may not always achieve the intended results. On the issue of independence, for instance, it could be argued that two directors, who whilst unrelated to each other, but who have been friends since young would not be likely to deal with each other with objectivity. Conversely, it may very well be the case that two directors who are related to each other would be less restrained in being critical or offering contradictory viewpoints to each other.
    16 As the Singapore capital markets deepen and mature, and as market mechanisms for promoting good corporate governance develop, the approach recommended by the CGC can be reviewed in future and can evolve accordingly.

    The Code of Corporate Governance

    17 Before deciding on the recommendations, the CGC conducted a month-long public consultation in December 2000. It received numerous feedback from various quarters, many of which were positive. The Committee felt encouraged by the level of interest in this matter and the reassuring comments, and would like to take this opportunity to thank those who had contributed to this process. Several of the points raised in the feedback have indeed been incorporated into this Report and the accompanying Code.
    18 The objective of the Code is not to prescribe corporate behaviour in detail but to essentially secure sufficient disclosure so that investors and others can assess a company's performance and governance practices and respond in an informed way.
    19 The Code is divided into four main sections:
    •   Board Matters;
    •   Remuneration Matters;
    •   Accountability and Audit; and
    •   Communication with Shareholders.
    20 The recommendations are presented in the format of principles and guidance notes. The Committee now sets forth its underlying thoughts in arriving at the recommendations.

    Board Matters

    21 In the McKinsey survey (2000), 77 percent of the respondents in Asia ranked board practices to be at least as important as financial issues in stock selection. Indeed, there is no substitute for having good board practices and ensuring the integrity of members appointed to the Board of Directors. Without integrity, companies may be able to meet prescribed rules and yet still frustrate the intent of any corporate governance code. Meeting the form but not the substance of the Code would not lead to improved corporate governance.
    22 Other than charting corporate strategy, the Board of Directors is chiefly responsible for monitoring managerial performance and achieving an adequate return for shareholders, while preventing conflicts of interest and balancing competing demands on the corporation. Most governance guidelines and codes of best practice assert that the Board should explicitly assume responsibility for the stewardship of the corporation and emphasise that board responsibilities are distinct from management responsibilities.
    23 Being primarily responsible for the workings of the Board, the chairman's role in securing good corporate governance is crucial. To provide some guidance, the Code sets out some examples of the role and responsibilities of the chairman. On the other hand, the Chief Executive Officer ("CEO"), representing management, shall have the general executive responsibility for the conduct of the business and affairs of the company. In carrying out his duties, the CEO should work closely with the Board to implement the corporate policies set by the Board and to realise a common vision for the company.
    24 There are two views on the issue of the leadership structure. The first, as in the case of the UK and Australia, is a dual leadership structure, i.e. where there is a separate CEO and chairman on the Board. The argument is that with a clear division of responsibilities at the head of the company, the likelihood of an individual or a group of individuals having unfettered powers of decision will be reduced. It is noted that a separation is most effective if the chairman is independent. The second view is that such a structure is not necessary as it may hinder the decision-making process of the company. As a principle, the CGC is inclined towards the former view, so as to help ensure an appropriate balance of power and increased accountability. Such a separation (of the chairman and CEO) is important because it enhances the independence of the board in monitoring management. This is especially important in Singapore where the board tends to include a significant executive element, unlike most boards of the best-managed companies in the US, where almost all directors are independent. Moreover, as other mechanisms that discipline management (such as an active take-over market and shareholder activism) are less developed here, there is this increased need for a dual leadership structure.
    25 Philosophically, there is also merit in requiring the chairman and CEO of the company to be unrelated, in order to avoid a significant concentration of power. However, the Committee notes that a company whose chairman and CEO are related to each other could be as well managed as one which does not. The Committee has decided that while it would not advocate one way or the other, it would require any such relationships to be disclosed.
    26 The CGC subscribes to the view that Boards must have some degree of independence from Management in order to effectively fulfil their responsibilities. Accordingly, the Committee recommends that independent directors make up at least one-third of the Board. Such independent board members play an important role in areas where the interests of Management, the company and shareholders may diverge, such as executive remuneration, succession planning, changes of corporate control and the audit function. Furthermore, they are able to bring an objective view to the evaluation of the performance of the Board and Management.
    27 The Committee also views the information on attendance of individual directors at Board and all specialised committee meetings as something basic but important, especially when there is an increasing trend for Boards to set up committees to perform specific functions delegated to them. Whilst attendance at Board meetings itself is not the sole or a conclusive indicator of the level of commitment or competence of a director, disclosure of such information will enable investors to come closer to making informed decisions as to whether to approve the re-election of the directors concerned.
    28 The setting up of a Nominating Committee ("NC") is viewed by the CGC to be one of the most important elements of a good Board. It is intended to make the process of board appointments transparent and to assess the effectiveness of the Board as a whole and of individual directors.
    29 While most codes do not establish performance criteria for Boards, a range of performance measurement tools is listed in the guidance notes. It is hoped this will not only allow flexibility on the part of companies to utilise measures that are most applicable to them, but also allow investors to compare the company with its industry peers. The Committee is of the view that ultimately, it should be left to the NC to recommend, and the Board to decide, the criteria upon which the Board's performance is to be evaluated.

    Remuneration Matters

    30 The principal objectives of the CGC's recommendations on remuneration matters are to facilitate appropriateness, transparency and accountability on the issue of executive remuneration. These are premised on the fundamental principle of accountability to shareholders.
    31 The Committee has recommended principles for executive remuneration, which hopes to place greater weightage on individual performance of executive directors and key managers, as well as corporate performance, as determinants of remuneration.
    32 The recommendations relating to the setting out of processes in remuneration-setting, in particular, the institutionalisation of remuneration committees, seek to provide a greater degree of independence, impartiality and transparency in remuneration-setting.
    33 The principles and guidance notes relating to the disclosure of corporate remuneration practices are intended to provide investors complete and meaningful information on the application of the Board's remuneration policies in the context of the performance of the company. These disclosure requirements again promote the fundamental tenets of accountability and fairness. Disclosures will provide shareholders, in an easily understood format, with the information they need to know on the quantum and components of remuneration, in conjunction with the company's performance and stated policies.
    34 The Committee has carefully considered the extent of disclosure of individual directors' remuneration. On the one hand, the disclosure of individual directors' remuneration is in line with international best practice, and would be of benefit to shareholders, who have a right to know how directors are being compensated from corporate funds. However, this has to be balanced against the argument that such a practice might erode the personal privacy of directors of publicly listed companies (particularly in view of the fact that Singapore is a relatively small community), and might create inflationary pressure to ratchet directors' remuneration upwards. The Committee has therefore decided to recommend, at the minimum, that companies disclose the names of directors earning remuneration within bands of S$250,000. However, as best practice, companies are strongly encouraged to fully disclose the individual remuneration of directors. The Committee notes that the International Organisation of Securities Commissions ("IOSCO") has recommended, albeit in the context of prospectuses, that directors are required to disclose their individual remuneration.
    35 There arises an issue as to whether these remuneration disclosure requirements should be extended to key executives of the company (over and above the directors). The practice in the US and Australia is to require the disclosure of the top-earning executives. After considering feedback received during the public consultation, the Committee decided to extend the disclosure of remuneration to at least the top 5 key executives of the company, so as to give investors a picture of how remuneration is distributed in the top tier of the company's Management
    36 It is also hoped that corporations will utilise the use of longer-term incentive schemes, including shares and share option schemes. This is to align the interests of directors and executives with those of shareholders through holding a direct equity stake in the future of the company. Whilst the alignment of interest is important, shareholders also need to be adequately informed on such schemes and to understand the premise of such schemes, to ensure they are receiving due reward for the dilution that equity participation entails.
    37 It should be stated that the guidelines are not meant to unduly stultify corporate policies on remuneration. Companies will still retain the flexibility to attract, retain and motivate employees in the interests of improved corporate performance.

    Accountability and Audit

    38 In the area of "Accountability and Audit", the respective roles of the Board and Management tend to overlap. In making its recommendations, the Committee seeks to draw attention to the roles and responsibilities of Management in the corporate governance process, as this will present the roles and responsibilities of the Board in better perspective. In this respect, the CGC stresses the accountability of Management to the Board, and the importance of providing all (both executive and nonexecutive) members of the Board with monthly management accounts. Also, the Committee recommends "quarterly reporting", so that minority shareholders have access to more timely information.
    39 Firstly, the CGC emphasises the importance of the independence of the Audit Committee ("AC"). It subscribes to the view that the chairman of the AC should be an independent director and that ACs should establish a practice of meeting with the external auditors and the internal auditors, without the presence of the company's Management.
    40 Secondly, the Committee emphasises the importance of the internal audit function being independent of the Management as the internal audit function is one of the principal means by which the AC is able to carry out its responsibilities effectively. There should be safeguards to protect the independence of the internal auditor. Accordingly, the CGC recommends that the internal auditor should report directly to the AC. In practice, the internal auditor's responsibilities often include activities other than internal audit. For the internal audit function to be effective, it is important that the internal auditor is not responsible for auditing its own activities.
    41 Thirdly, the Committee emphasises the importance of Management's responsibility in maintaining a sound system of internal controls, and the Board's oversight responsibility to ensure that this is done. Whilst the Board collectively shares this responsibility, we would emphasise that it is the AC's specific role to ensure that an annual review of all material controls is conducted. While the Committee subscribes to the view that the Board should comment on the adequacy of the internal controls, it feels that the procedures for establishing whether the controls are adequate should be left to the market to develop.
    42 The CGC subscribes to the view that the members of the AC should be appropriately qualified, as this will enhance the members' confidence and independence in the committee's dealing with the Management, as well as with both the external and the internal auditors. In this respect, the Committee recommends that at least two members should have accounting or related financial management expertise instead of one member as required by the NYSE. However, like the US requirement, the Committee emphasises that such qualification should be left to the Board's interpretation in its business judgement. The Committee feels that the requirement for at least two members to have the requisite expertise or experience would strengthen the objectivity of the AC's views and enhance the effectiveness of the AC when it liases with the external auditors.
    43 The Committee also subscribes to the view that the internal audit function should be adequately staffed, and accorded appropriate standing and authority to enable the internal auditor to gain access to information and the senior members of the management team. This is important for the internal audit function of the company to operate effectively.

    Communication with Shareholders

    44 The principles and guidance notes in this section seek to encourage companies to engage in more effective communication with shareholders. The PWC survey (2000) showed that the manner and frequency with which information is disseminated to shareholders and/or analysts is clearly a key factor in any investment decision. In particular, 74 percent of the respondents wanted greater disclosure and transparency in the annual reports and financial statements.
    45 The AGM is often the main opportunity for small shareholders to be fully briefed on the company's activities and to question the Management on both operational and governance matters. Shareholders have the right to participate in, and to be sufficiently informed on, major corporate developments. Companies should be encouraged to welcome the views and inputs of shareholders, and to address investors' concerns. Additionally, in disclosing information, companies should be as descriptive, detailed and forthcoming as possible, and avoid meaningless boiler-plate statements.
    46 The Committee is mindful of the risk that close contact between companies and its shareholders might lead to different shareholders receiving different information. In particular, unpublished price-sensitive information may often be disclosed at analysts' briefings and private conversations with major investors. The Committee therefore subscribes to the view that all investors, whether institutional or retail, should be entitled to the same level of communication and disclosure. If such information can reasonably be expected to materially affect the market activity and the share price, the company in fact has an obligation under the SGX Listing Rules to disclose to the Exchange and shareholders as soon as reasonably practicable. Further, one of the OECD Principles of Corporate Governance states that processes and procedures for general shareholder meetings should allow for equitable treatment of all shareholders. Such an equitable and equal treatment should be extended to the issue of disclosure. The Committee felt that in the event where a company unintentionally or inadvertently discloses certain information to a select group, it should be required to make the same disclosure to the public. This could be done by way of a press release, an announcement on the company's website, or other comparable means.
    47 The Committee notes that the default requirement in the Companies Act is that voting must be made by physical attendance, whether of the registered shareholder or his nominated proxy. Telephonic, electronic, or other modes of absentia voting is however allowed if it is specifically provided for in the company's articles of association. The Committee believes that it is important to encourage shareholders to play a more active role in voting at general meetings. This can be done by allowing absentia or by harnessing new electronic voting methods such as mail, email, fax, etc, if the shareholders are agreeable to such a process.
    48 The Committee notes that the UK Combined Code requires the chairmen of the audit, remuneration and nomination committees to be available to answer questions at the AGM. The Committee feels that it is also important that the company's external auditors be present as well, to assist the directors in addressing any relevant queries by shareholders.

    Future Evolution of the Code

    49 Needless to say, the Code will continue to evolve over time, to maintain its relevance and applicability with the changing corporate landscape. The Committee therefore suggests that the Singapore Exchange, with inputs from interested parties such as bodies representing directors, investors, fund managers, accountants, etc, spearhead the initiative to co-ordinate future reviews or updates of the Code. Such an effort to review the Code could also be conducted by the panel recommended by the Disclosure and Accounting Standards Committee to undertake the task of reviewing and enhancing reporting and disclosure standards in Singapore. We hope to see the continued involvement of industry representatives in these future reviews.
    50 The Committee is pleased to set forth its recommendations.
    • Code of Corporate Governance 2012

      • Board Matters

        THE BOARD'S CONDUCT OF AFFAIRS

        Principle:

        1 Every company should be headed by an effective Board to lead and control the company. The Board is collectively responsible for the long-term success of the company. The Board works with Management to achieve this objective and Management remains accountable to the Board.

        Guidelines:

        1.1 The Board's role is to:
        (a) provide entrepreneurial leadership, set strategic objectives, and ensure that the necessary financial and human resources are in place for the company to meet its objectives;
        (b) establish a framework of prudent and effective controls which enables risks to be assessed and managed, including safeguarding of shareholders' interests and the company's assets;
        (c) review management performance;
        (d) identify the key stakeholder groups and recognise that their perceptions affect the company's reputation;
        (e) set the company's values and standards (including ethical standards), and ensure that obligations to shareholders and other stakeholders are understood and met; and
        (f) consider sustainability issues, e.g. environmental and social factors, as part of its strategic formulation.
        1.2 All directors must objectively discharge their duties and responsibilities at all times as fiduciaries in the interests of the company.
        1.3 The Board may delegate the authority to make decisions to any board committee but without abdicating its responsibility. Any such delegation should be disclosed.
        1.4 The Board should meet regularly and as warranted by particular circumstances, as deemed appropriate by the board members. Companies are encouraged to amend their Articles of Association (or other constitutive documents) to provide for telephonic and video-conference meetings. 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, should be disclosed in the company's Annual Report.
        1.5 Every company should prepare a document with guidelines setting forth:
        (a) the matters reserved for the Board's decision; and
        (b) clear directions to Management on matters that must be approved by the Board.
        The types of material transactions that require board approval under such guidelines should be disclosed in the company's Annual Report.
        1.6 Incoming directors should receive comprehensive and tailored induction on joining the Board. This should include his duties as a director and how to discharge those duties, and an orientation program to ensure that they are familiar with the company's business and governance practices. The company should provide training for first-time director1 in areas such as accounting, legal and industry-specific knowledge as appropriate.

        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.
        1.7 Upon appointment of each director, the company should provide a formal letter to the director, setting out the director's duties and obligations.

        BOARD COMPOSITION AND GUIDANCE

        Principle:

        2 There should be a strong and independent element on the Board, which is able to exercise objective judgement on corporate affairs independently, in particular, from Management and 10% shareholders2. No individual or small group of individuals should be allowed to dominate the Board's decision making.

        Guidelines:

        2.1 There should be a strong and independent element on the Board, with independent directors making up at least one-third of the Board.
        2.2 The independent directors should make up at least half of the Board where:
        (a) the Chairman of the Board (the "Chairman") and the chief executive officer (or equivalent) (the "CEO") is the same person;
        (b) the Chairman and the CEO are immediate family3 members;
        (c) the Chairman is part of the management team; or
        (d) the Chairman is not an independent director.
        2.3 An "independent" director is one who has no relationship with the company, its related corporations4, its 10% shareholders or its officers that could interfere, or be reasonably perceived to interfere, with the exercise of the director's independent business judgement with a view to the best interests of the company. The Board should identify in the company's Annual Report each director it considers to be independent. The Board should determine, taking into account the views of the Nominating Committee ("NC"), whether the director is independent in character and judgement and whether there are relationships or circumstances which are likely to affect, or could appear to affect, the director's judgement. Directors should disclose to the Board any such relationship as and when it arises. The Board should state its reasons if it determines that a director is independent notwithstanding the existence of relationships or circumstances which may appear relevant to its determination, including the following:
        (a) a director being employed by the company or any of its related corporations for the current or any of the past three financial years;
        (b) a director who has an immediate family member who is, or has been in any of the past three financial years, employed by the company or any of its related corporations and whose remuneration is determined by the remuneration committee;
        (c) a director, or an immediate family member, accepting any significant compensation from the company or any of its related corporations for the provision of services, for the current or immediate past financial year, other than compensation for board service;
        (d) a director:
        (i) who, in the current or immediate past financial year, is or was; or
        (ii) whose immediate family member, in the current or immediate past financial year, is or was,
        a 10%shareholder of, or a partner in (with 10% or more stake), or an executive officer of, or a director of, any organisation to which the company or any of its subsidiaries made, or from which the company or any of its subsidiaries received, significant payments or material services (which may include auditing, banking, consulting and legal services), in the current or immediate past financial year. As a guide, payments5 aggregated over any financial year in excess of S$200,000 should generally be deemed significant;
        (e) a director who is a 10% shareholder or an immediate family member of a 10% shareholder of the company; or
        (f) a director who is or has been directly associated with6 a 10% shareholder of the company, in the current or immediate past financial year.
        The relationships set out above are not intended to be exhaustive, and are examples of situations which would deem a director to be not independent. If the Board wishes, in spite of the existence of one or more of these relationships, to consider the director as independent, it should disclose in full the nature of the director's relationship and bear responsibility for explaining why he should be considered independent.
        2.4 The independence of any director who has served on the Board beyond nine years from the date of his first appointment should be subject to particularly rigorous review. In doing so, the Board should also take into account the need for progressive refreshing of the Board. The Board should also explain why any such director should be considered independent.
        2.5 The Board should examine its size and, with a view to determining the impact of the number upon effectiveness, decide on what it considers an appropriate size for the Board, which facilitates effective decision making. The Board should take into account the scope and nature of the operations of the company, the requirements of the business and the need to avoid undue disruptions from changes to the composition of the Board and board committees. The Board should not be so large as to be unwieldy.
        2.6 The Board and its board committees should comprise directors who as a group provide an appropriate balance and diversity of skills, experience, gender and knowledge of the company. They should also provide core competencies such as accounting or finance, business or management experience, industry knowledge, strategic planning experience and customer-based experience or knowledge.
        2.7 Non-executive directors should:
        (a) constructively challenge and help develop proposals on strategy; and
        (b) review the performance of Management in meeting agreed goals and objectives and monitor the reporting of performance.
        2.8 To facilitate a more effective check on Management, non-executive directors are encouraged to meet regularly without the presence of Management.

        CHAIRMAN AND CHIEF EXECUTIVE OFFICER

        Principle:

        3 There should be a clear division of responsibilities between the leadership of the Board and the executives responsible for managing the company's business. No one individual should represent a considerable concentration of power.

        Guidelines:

        3.1 The Chairman and the CEO should in principle be separate persons, to ensure an appropriate balance of power, increased accountability and greater capacity of the Board for independent decision making. The division of responsibilities between the Chairman and the CEO should be clearly established, set out in writing and agreed by the Board. In addition, the Board should disclose the relationship between the Chairman and the CEO if they are immediate family members.
        3.2 The Chairman should:
        (a) lead the Board to ensure its effectiveness on all aspects of its role;
        (b) set the agenda and ensure that adequate time is available for discussion of all agenda items, in particular strategic issues;
        (c) promote a culture of openness and debate at the Board;
        (d) ensure that the directors receive complete, adequate and timely information;
        (e) ensure effective communication with shareholders;
        (f) encourage constructive relations within the Board and between the Board and Management;
        (g) facilitate the effective contribution of non-executive directors in particular; and
        (h) promote high standards of corporate governance.
        The responsibilities set out above provide guidance and should not be taken as a comprehensive list of all the duties and responsibilities of a Chairman.
        3.3 Every company should appoint an independent director to be the lead independent director where:
        (a) the Chairman and the CEO is the same person;
        (b) the Chairman and the CEO are immediate family members;
        (c) the Chairman is part of the management team; or
        (d) the Chairman is not an independent director.
        The lead independent director (if appointed) should be available to shareholders where they have concerns and for which contact through the normal channels of the Chairman, the CEO or the chief financial officer (or equivalent) (the "CFO") has failed to resolve or is inappropriate.
        3.4 Led by the lead independent director, the independent directors should meet periodically without the presence of the other directors, and the lead independent director should provide feedback to the Chairman after such meetings.

        BOARD MEMBERSHIP

        Principle:

        4 There should be a formal and transparent process for the appointment and re-appointment of directors to the Board.

        Guidelines:

        4.1 The Board should establish a NC to make recommendations to the Board on all board appointments, with written terms of reference which clearly set out its authority and duties. The NC should comprise at least three directors, the majority of whom, including the NC Chairman, should be independent. The lead independent director, if any, should be a member of the NC. The Board should disclose in the company's Annual Report the 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
        4.2 The NC should make recommendations to the Board on relevant matters relating to:
        (a) the review of board succession plans for directors, in particular, the Chairman and for the CEO;
        (b) the development of a process for evaluation of the performance of the Board, its board committees and directors;
        (c) the review of training and professional development programs for the Board; and
        (d) the appointment and re-appointment of directors (including alternate directors, if applicable).
        Important issues to be considered as part of the process for the selection, appointment and re-appointment of directors include composition and progressive renewal of the Board and each director's competencies, commitment, contribution and performance (e.g. attendance, preparedness, participation and candour) including, if applicable, as an independent director. All directors should be required to submit themselves for re-nomination and re-appointment at regular intervals and at least once every three years.
        4.3 The NC is charged with the responsibility of determining annually, and as and when circumstances require, if a director is independent, bearing in mind the circumstances set forth in Guidelines 2.3 and 2.4 and any other salient factors. If the NC considers that a director who has one or more of the relationships mentioned therein can be considered independent, it shall provide its views to the Board for the Board's consideration. Conversely, the NC has the discretion to consider that a director is not independent even if he does not fall under the circumstances set forth in Guideline 2.3 or Guideline 2.4, and should similarly provide its views to the Board for the Board's consideration.
        4.4 When a director has multiple board representations, he must ensure that sufficient time and attention is given to the affairs of each company. The NC should decide if a director is able to and has been adequately carrying out hisduties as a director of the company, taking into consideration the director's number of listed company board representations and other principal commitments7. Guidelines should be adopted that address the competing time commitments that are faced when directors serve on multiple boards. The Board should determine the maximum number of listed company board representations which any director may hold, and disclose this in the company's Annual Report.
        4.5 Boards should generally avoid approving the appointment of alternate directors. Alternate directors should only be appointed for limited periods in exceptional cases such as when a director has a medical emergency. If an alternate director is appointed, the alternate director should be familiar with the company affairs, and be appropriately qualified. If a person is proposed to be appointed as an alternate director to an independent director, the NC and the Board should review and conclude that the person would similarly qualify as an independent director, before his appointment as an alternate director. Alternate directors bear all the duties and responsibilities of a director.
        4.6 A description of the process for the selection, appointment and re-appointment of directors to the Board should be disclosed in the company's Annual Report. This should include disclosure on the search and nomination process.
        4.7 Key information regarding directors, such as academic and professional qualifications, shareholding in the company and its related corporations, board committees served on (as a member or chairman), date of first appointment as a director, date of last re-appointment as a director, directorships or chairmanships both present and those held over the preceding three years in other listed companies, and other principal commitments, should be disclosed in the company's Annual Report. In addition, the company's annual disclosure on corporate governance should indicate which directors are executive, non-executive or considered by the NC to be independent. The names of the directors submitted for appointment or re-appointment should also be accompanied by details and information to enable shareholders to make informed decisions. Such information, which should also accompany the relevant resolution, would include:
        (a) any relationships including immediate family relationships between the candidate and the directors, the company or its 10% shareholders;
        (b) a separate list of all current directorships in other listed companies; and
        (c) details of other principal commitments.

        BOARD PERFORMANCE

        Principle:

        5 There should be a formal annual assessment of the effectiveness of the Board as a whole and its board committees and the contribution by each director to the effectiveness of the Board.

        Guidelines:

        5.1 Every Board should implement a process to be carried out by the NC for assessing the effectiveness of the Board as a whole and its board committees and for assessing the contribution by the Chairman and each individual director to the effectiveness of the Board. The Board should state in the company's Annual Report how the 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.
        5.2 The NC should decide how the Board's performance may be evaluated and propose objective performance criteria. Such performance criteria, which allow for comparison with industry peers, should be approved by the Board and address how the Board has enhanced long-term shareholder value. These performance criteria should not be changed from year to year, and where circumstances deem it necessary for any of the criteria to be changed, the onus should be on the Board to justify this decision.
        5.3 Individual evaluation should aim to assess whether each director continues to contribute effectively and demonstrate commitment to the role (including commitment of time for meetings of the Board and board committees, and any other duties). The Chairman should act on the results of the performance evaluation, and, in consultation with the NC, propose, where appropriate, new members to be appointed to the Board or seek the resignation of directors.

        ACCESS TO INFORMATION

        Principle:

        6 In order to fulfil their responsibilities, directors should be provided with complete, adequate and timely information prior to board meetings and on an on-going basis so as to enable them to make informed decisions to discharge their duties and responsibilities.

        Guidelines:

        6.1 Management has an obligation to supply the Board with complete, adequate information in a timely manner. Relying purely on what is volunteered by Management is unlikely to be enough in all circumstances and further enquiries may be required if the particular director is to fulfil his duties properly. Hence, the Board should have separate and independent access to Management. Directors are entitled to request from Management and should be provided with such additional information as needed to make informed decisions. Management shall provide the same in a timely manner.
        6.2 Information provided should include board papers and related materials, background or explanatory information relating to matters to be brought before the Board, and copies of disclosure documents, budgets, forecasts and monthly internal financial statements. In respect of budgets, any material variance between the projections and actual results should also be disclosed and explained.
        6.3 Directors should have separate and independent access to the company secretary. The role of the company secretary should be clearly defined and should include responsibility for ensuring that board procedures are followed and that applicable rules and regulations are complied with. Under the direction of the Chairman, the company secretary's responsibilities include ensuring good information flows within the Board and its board committees and between Management and non-executive directors, advising the Board on all governance matters, as well as facilitating orientation and assisting with professional development as required. The company secretary should attend all board meetings.
        6.4 The appointment and the removal of the company secretary should be a matter for the Board as a whole.
        6.5 The Board should have a procedure for directors, either individually or as a group, in the furtherance of their duties, to take independent professional advice, if necessary, and at the company's expense.

        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:

        7 There should be a formal and transparent procedure for developing policy on executive remuneration and for fixing the remuneration packages of individual directors. No director should be involved in deciding his own remuneration.

        Guidelines:

        7.1 The Board should establish a Remuneration Committee ("RC") with written terms of reference which clearly set out its authority and duties. The RC should comprise at least three directors, the majority of whom, including the RC Chairman, should be independent. All of the members of the RC should be non-executive directors. This is to minimise the risk of any potential conflict of interest. The Board should disclose in the company's Annual Report the 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.
        7.2 The RC should review and recommend to the Board a general framework of remuneration for the Board and key management personnel8. The RC should also review and recommend to the Board the specific remuneration packages for each director as well as for the key management personnel. The RC's recommendations should be submitted for endorsement by the entire Board. The RC should cover all aspects of remuneration, including but not limited to director's fees, salaries, allowances, bonuses, options, share-based incentives and awards, and benefits in kind.
        7.3 If necessary, the RC should seek expert advice inside and/or outside the company on remuneration of all directors. The RC should ensure that existing relationships, if any, between the company and its appointed remuneration consultants will not affect the independence and objectivity of the remuneration consultants. The company should also disclose the names and firms of the remuneration consultants in the annual remuneration report, and include a statement on whether the remuneration consultants have any such relationships with the company.
        7.4 The RC should review the company's obligations arising in the event of termination of the executive directors' and key management personnel's contracts of service, to ensure that such contracts of service contain fair and reasonable termination clauses which are not overly generous. The RC should aim to be fair and avoid rewarding poor performance.

        LEVEL AND MIX OF REMUNERATION

        Principle:

        8 The level and structure of remuneration should be aligned with the long-term interest and risk policies of the company, and should be appropriate to attract, retain and motivate (a) the directors to provide good stewardship of the company, and (b) key management personnel to successfully manage the company. However, companies should avoid paying more than is necessary for this purpose.

        Guidelines:

        8.1 A significant and appropriate proportion of executive directors' and key management personnel's remuneration should be structured so as to link rewards to corporate and individual performance.Such performance-related remuneration should be aligned with the interests of shareholders and promote the long-term success of the company. It should take account of the risk policies of the company, be symmetric with risk outcomes and be sensitive to the time horizon of risks. There should be appropriate and meaningful measures for the purpose of assessing executive directors' and key management personnel's performance.
        8.2 Long-term incentive schemes are generally encouraged for executive directors and key management personnel. The RC should review whether executive directors and key management personnel should be eligible for benefits under long-term incentive schemes. The costs and benefits of long-term incentive schemes should be carefully evaluated. In normal circumstances, offers of shares or grants of options or other forms of deferred remuneration should vest over a period of time. The use of vesting schedules, whereby only a portion of the benefits can be exercised each year, is also strongly encouraged. Executive directors and key management personnel should be encouraged to hold their shares beyond the vesting period, subject to the need to finance any cost of acquiring the shares and associated tax liability.
        8.3 The remuneration of non-executive directors should be appropriate to the level of contribution, taking into account factors such as effort and time spent, and responsibilities of the directors. Non-executive directors should not be over-compensated to the extent that their independence may be compromised. The RC should also consider implementing schemes to encourage non-executive directors to hold shares in the company so as to better align the interests of such non-executive directors with the interests of shareholders.
        8.4 Companies are encouraged to consider the use of contractual provisions to allow the company to reclaim incentive components of remuneration from executive directors and key management personnel in exceptional circumstances of misstatement of financial results, or of misconduct resulting in financial loss to the company.

        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:

        9.1 The company should report to the shareholders each year on the 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. This annual remuneration report should form part of, or be annexed to the company's annual report of its directors. It should be the main means through which the company reports to shareholders on remuneration matters.

        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).
        9.2 The company should fully disclose the remuneration of each individual director and the CEO on a named basis. For administrative convenience, the company may round off the disclosed figures to the nearest thousand dollars. There should 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.
        9.3 The company should 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. Companies need only show the applicable bands. There should 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.
        9.4 For transparency, the annual remuneration report should disclose the 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. The company need only show the applicable bands.
        9.5 The annual remuneration report should also contain details of employee share schemes to enable their shareholders to assess the benefits and potential cost to the companies. The important terms of the share schemes should be disclosed, including the potential size of grants, methodology of valuing stock options, exercise price of options that were granted as well as outstanding, whether the exercise price was at the market or otherwise on the date of grant, market price on the date of exercise, the vesting schedule, and the justifications for the terms adopted.
        9.6 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.

        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:

        10 The Board should present a balanced and understandable assessment of the company's performance, position and prospects.

        Guidelines:

        10.1 The Board's responsibility to provide a balanced and understandable assessment of the company's performance, position and prospects extends to interim and other price sensitive public reports, and reports to regulators (if required).
        10.2 The Board should take adequate steps to ensure compliance with legislative and regulatory requirements, including requirements under the listing rules of the securities exchange, for instance, by establishing written policies where appropriate.
        10.3 Management should provide all members of the Board with management accounts and such explanation and information on a monthly basis and as the Board may require from time to time to enable the Board to make a balanced and informed assessment of the company's performance, position and prospects.

        RISK MANAGEMENT AND INTERNAL CONTROLS

        Principle:

        11 The Board is responsible for the governance of risk. The Board should ensure that Management maintains a sound system of risk management and internal controls to safeguard shareholders' interests and the company's assets,and should determine the nature and extent of the significant risks which the Board is willing to take in achieving its strategic objectives.

        Guidelines:

        11.1 The Board should determine the company's levels of risk tolerance and risk policies, and oversee Management in the design, implementation and monitoring of the risk management and internal control systems.
        11.2 The Board should, at least annually, review the adequacy and effectiveness of the company's risk management and internal control systems, including financial, operational, compliance and information technology controls. Such review can be carried out internally or with the assistance of any competent third parties.
        11.3 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, in the company's Annual Report. The Board's 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 in the company's Annual Report 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 a 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.
        11.4 The Board may establish a separate board risk committee or otherwise assess appropriate means to assist it in carrying out its responsibility of overseeing the company's risk management framework and policies.

        AUDIT COMMITTEE

        Principle:

        12 The Board should establish an Audit Committee ("AC") with written terms of reference which clearly set out its authority and duties.9

        Guidelines:

        12.1 The AC should comprise at least three directors, the majority of whom, including the AC Chairman, should be independent. All of the members of the AC should be non-executive directors. The Board should disclose in the company's Annual Report the 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.
        12.2 The Board should ensure that the members of the AC are appropriately qualified to discharge their responsibilities. At least two members, including the AC Chairman, should have recent and relevant accounting or related financial management expertise or experience, as the Board interprets such qualification in its business judgement.
        12.3 The AC should have explicit authority to investigate any matter within its terms of reference, full access to and co-operation by Management and full discretion to invite any director or executive officer to attend its meetings, and reasonable resources to enable it to discharge its functions properly.
        12.4 The duties of the AC should include:
        (a) reviewing the significant financial reporting issues and judgements so as to ensure the integrity of the financial statements of the company and any announcements relating to the company's financial performance;
        (b) reviewing and reporting to the Board at least annually the adequacy and effectiveness of the company's internal controls, including financial, operational, compliance and information technology controls (such review can be carried out internally or with the assistance of any competent third parties);
        (c) reviewing the effectiveness of the company's internal audit function;
        (d) reviewing the scope and results of the external audit, and the independence and objectivity of the external auditors; and
        (e) making recommendations to the Board on the proposals to the shareholders on the appointment, re-appointment and removal of the external auditors, and approving the remuneration and terms of engagement of the external auditors.
        12.5 The AC should meet (a) with the external auditors, and (b) with the internal auditors, in each case without the presence of Management, at least annually.
        12.6 The AC should review the independence of the external auditors annually and should state (a) the aggregate amount of fees paid to the external auditors for that financial year, and (b) a breakdown of the fees paid in total for audit and non-audit services respectively, or an appropriate negative statement, in the company's Annual Report. Where the external auditors also supply a substantial volume of non-audit services to the company, the AC should keep the nature and extent of such services under review, seeking to maintain objectivity.
        12.7 The AC should review the policy and arrangements by which staff of the company and any other persons may, in confidence, raise concerns about possible improprieties in matters of financial reporting or other matters. The AC's objective should be to ensure that arrangements are in place for such concerns to be raised and independently investigated, and for appropriate follow-up action to be taken. The existence of a whistle-blowing policy should be disclosed in the company's Annual Report, and procedures for raising such concerns should be publicly disclosed as appropriate.
        12.8 The Board should disclose a summary of all the AC's activities in the company's Annual Report. The Board should also disclose in the company's Annual Report measures taken by the AC members to keep abreast of changes to accounting standards and issues which have a direct impact on financial statements.
        12.9 A former partner or director of the company's existing auditing firm or auditing corporation should not act as a member of the company's AC: (a) within a period of 12 months commencing on the date of his ceasing to be a partner of the auditing firm or director of the auditing corporation; and in any case (b) for as long as he has any financial interest in the auditing firm or auditing corporation.

        INTERNAL AUDIT

        Principle:

        13 The company should establish an effective internal audit function that is adequately resourced and independent of the activities it audits.

        Guidelines:

        13.1 The Internal Auditor's primary line of reporting should be to the AC Chairman although the Internal Auditor would also report administratively to the CEO. The AC approves the hiring, removal, evaluation and compensation of the head of the internal audit function, or the accounting / auditing firm or corporation to which the internal audit function is outsourced. The Internal Auditor should have unfettered access to all the company's documents, records, properties and personnel, including access to the AC.
        13.2 The AC should ensure that the internal audit function is adequately resourced and has appropriate standing within the company. For the avoidance of doubt, the internal audit function can be in-house, outsourced to a reputable accounting/auditing firm or corporation, or performed by a major shareholder, holding company or controlling enterprise with an internal audit staff.
        13.3 The internal audit function should be staffed with persons with the relevant qualifications and experience.
        13.4 The Internal Auditor should carry out its function according to the standards set by nationally or internationally recognised professional bodies including the Standards for the Professional Practice of Internal Auditing set by The Institute of Internal Auditors.
        13.5 The AC should, at least annually, review the adequacy and effectiveness of the internal audit function.

        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:

        14 Companies should treat all shareholders fairly and equitably, and should recognise, protect and facilitate the exercise of shareholders' rights, and continually review and update such governance arrangements.

        Guidelines:

        14.1 Companies should facilitate the exercise of ownership rights by all shareholders. In particular, shareholders have the right to be sufficiently informed of changes in the company or its business which would be likely to materially affect the price or value of the company's shares.
        14.2 Companies should ensure that shareholders have the opportunity to participate effectively in and vote at general meetings of shareholders. Shareholders should be informed of the rules, including voting procedures, that govern general meetings of shareholders.
        14.3 Companies should allow corporations which provide nominee or custodial services to appoint more than two proxies so that shareholders who hold shares through such corporations can attend and participate in general meetings as proxies.

        COMMUNICATION WITH SHAREHOLDERS

        Principle:

        15 Companies should actively engage their shareholders and put in place an investor relations policy to promote regular, effective and fair communication with shareholders.

        Guidelines:

        15.1 Companies should devise an effective investor relations policy to regularly convey pertinent informationto shareholders. In disclosing information, companies should be as descriptive, detailed and forthcoming as possible, and avoid boilerplate disclosures.
        15.2 Companies should disclose information on a timely basis through SGXNET and other information channels, including a well-maintained and updated corporate website. Where there is inadvertent disclosure made to a select group, companies should make the same disclosure publicly to all others as promptly as possible
        15.3 The Board should establish and maintain regular dialogue with shareholders, to gather views or inputs, and address shareholders' concerns.
        15.4 The Board should state in the company's Annual Report the steps it has taken to solicit and understand the views of the shareholders e.g. through analyst briefings, investor roadshows or Investors' Day briefings.
        15.5 Companies are encouraged to have a policy on payment of dividends and should communicate it to shareholders. Where dividends are not paid, companies should disclose their reasons.

        CONDUCT OF SHAREHOLDER MEETINGS

        Principle:

        16 Companies should encourage greater shareholder participation at general meetings of shareholders, and allow shareholders the opportunity to communicate their views on various matters affecting the company.

        Guidelines:

        16.1 Shareholders should have the opportunity to participate effectively in and to vote at general meetings of shareholders. Companies should make the appropriate provisions in their Articles of Association (or other constitutive documents) to allow for absentia voting at general meetings of shareholders.
        16.2 There should be separate resolutions at general meetings on each substantially separate issue. Companies should avoid "bundling" resolutions unless the resolutions are interdependent and linked so as to form one significant proposal.
        16.3 All directors should attend general meetings of shareholders. In particular, the Chairman of the Board and the respective Chairman of the AC, NC and RC should be present and available to address shareholders' queries at these meetings. The external auditors should also be present to address shareholders' queries about the conduct of audit and the preparation and content of the auditors' report.
        16.4 Companies should prepare minutes of general meetings that include substantial and relevant comments or queries from shareholders relating to the agenda of the meeting, and responses from the Board and Management, and to make these minutes available to shareholders upon their request.
        16.5 Companies should put all resolutions to vote by poll and make an announcement of the detailed results showing the number of votes cast for and against each resolution and the respective percentages. Companies are encouraged to employ electronic polling.
      • 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.

      • Download in PDF

        Please click herehere to view the Code of Corporate Governance 2012.

    • Code of Corporate Governance 2018

      • Introduction

        1. Corporate governance refers to having the appropriate people, processes and structures to direct and manage the business and affairs of the company to enhance long-term shareholder value, whilst taking into account the interests of other stakeholders. Companies that embrace the tenets of good governance, including accountability, transparency and sustainability, are more likely to engender investor confidence and achieve long-term sustainable business performance.
        2. The Code of Corporate Governance (the "Code"), which is applicable to listed companies in Singapore on a comply-or-explain basis, first came into effect on 1 January 2003. 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. The Practice Guidance complements the Code by providing guidance on the application of the Principles and Provisions and setting out best practices for companies. Adoption of the Practice Guidance is voluntary.
        3. The Code takes as its starting point a recognition that the Board has the dual role of setting strategic direction, and of setting the company's approach to governance. This includes establishing an appropriate culture, values and ethical standards of conduct at all levels of the company. The role of the Board is therefore broader than that of providing oversight. A well-constituted Board fosters more complete discussions, leading to better decisions and enhanced business performance. This version of the Code expands on the need for a strong and independent element on the Board, along with a diverse skill set.
        4. Given the centrality of the Board to good corporate governance, it is fundamental that the Chairman of the Board (the "Chairman") sets the right tone. The Chairman should encourage a full and frank exchange of views, drawing out contributions from all directors so that the debate benefits from the full diversity of views around the boardroom table. The Chairman should seek to stimulate and engender a robust yet collegiate setting, set the right ethical and behavioural tone, and provide leadership to the Board.
        5. Good corporate governance is good for the company, with a well-governed company better placed to perform over the longer-term. The Code should not be seen as burdensome but should help companies by giving clear direction on good Board and Management practices that will help build investor and stakeholder confidence. For this outcome, a culture of substantive compliance, rather than a checklist approach, is crucial. A sustainably successful company is good for myriad stakeholders: employees, suppliers, customers, shareholders, as well as society at large.

        Comply or explain

        6. This updated version of the Code represents a significant development both in terms of the way the Code is structured, and the way in which companies are required to describe their corporate governance practices.
        7. This version of the Code has at its core broad Principles of corporate governance. Compliance with, and observation of, these Principles is mandatory. These Principles set out broadly accepted characteristics of good corporate governance. Companies are required1 to describe their corporate governance practices with reference to both the Principles and Provisions, and how the company's practices conform to the Principles.
        8. The Provisions that underpin the Principles are designed to support compliance with the Principles. These Provisions, which replace the Guidelines of previous Codes, are drafted in a simple and direct manner, and describe the tenets of good corporate governance. Companies are expected to comply with the Provisions, and variations from Provisions are acceptable to the extent that companies explicitly state and explain how their practices are consistent with the aim and philosophy of the Principle in question. The explanations of variations should be comprehensive and meaningful.
        9. The emphasis of the Code is for companies to provide thoughtful and meaningful explanations around their practices, and for investors to carefully consider these discussions as part of their engagements with companies. Frank and informed dialogue between companies and their shareholders is a central tenet of good corporate governance, and encourages more active stewardship. Better engagement between these parties will benefit the company and investors.

        1 Rule 710 of the SGX Listing Rules (Mainboard) / Rule 710 of the SGX Listing Rules (Catalist)

      • Board Matters

        THE BOARD'S CONDUCT OF AFFAIRS

        Principle:

        1 The company is headed by an effective Board which is collectively responsible and works with Management for the long-term success of the company.

        Provisions:

        1.1 Directors are fiduciaries who act objectively in the best interests of the company and hold Management accountable for performance. The Board puts in place a code of conduct and ethics, sets appropriate tone-from-the-top and desired organisational culture, and ensures proper accountability within the company. Directors facing conflicts of interest recuse themselves from discussions and decisions involving the issues of conflict.
        1.2 Directors understand the company's business as well as their directorship duties (including their roles as executive, non-executive and independent directors). Directors are provided with opportunities to develop and maintain their skills and knowledge at the company's expense2. The induction, training and development provided to new and existing directors are disclosed in the company's annual report.
        1.3 The Board decides on matters that require its approval and clearly communicates this to Management in writing. Matters requiring board approval are disclosed in the company's annual report.
        1.4 Board committees, including Executive Committees (if any), are formed with clear written terms of reference setting out their compositions, authorities and duties, including reporting back to the Board. The names of the committee members, the terms of reference, any delegation of the Board's authority to make decisions, and a summary of each committee's activities, are disclosed in the company's annual report.
        1.5 Directors attend and actively participate in Board and board committee meetings. The number of such meetings and each individual director's attendances at such meetings are disclosed in the company's annual report. Directors with multiple board representations ensure that sufficient time and attention are given to the affairs of each company.
        1.6 Management provides directors with complete, adequate and timely information prior to meetings and on an on-going basis to enable them to make informed decisions and discharge their duties and responsibilities.
        1.7 Directors have separate and independent access to Management, the company secretary, and external advisers (where necessary) at the company's expense. The appointment and removal of the company secretary is a decision of the Board as a whole.

        BOARD COMPOSITION AND GUIDANCE

        Principle:

        2 The Board has an appropriate level of independence and diversity of thought and background in its composition to enable it to make decisions in the best interests of the company.

        Provisions:

        2.1 An "independent" director3 is one who is independent in conduct, character and judgement, and has no relationship with the company, its related corporations4, its substantial shareholders5 or its officers that could interfere, or be reasonably perceived to interfere, with the exercise of the director's independent business judgement in the best interests of the company6.
        2.2 Independent directors make up a majority of the Board7 where the Chairman is not independent8.
        2.3 Non-executive directors make up a majority of the Board.
        2.4 The Board and board committees are of an appropriate size, and comprise directors who as a group provide the appropriate balance and mix of skills, knowledge, experience, and other aspects of diversity such as gender and age, so as to avoid groupthink and foster constructive debate. The board diversity policy and progress made towards implementing the board diversity policy, including objectives, are disclosed in the company's annual report.
        2.5 Non-executive directors and/or independent directors, led by the independent Chairman or other independent director as appropriate, meet regularly without the presence of Management. The chairman of such meetings provides feedback to the Board and/or Chairman as appropriate.

        CHAIRMAN AND CHIEF EXECUTIVE OFFICER

        Principle:

        3 There is a clear division of responsibilities between the leadership of the Board and Management, and no one individual has unfettered powers of decision-making.

        Provisions:

        3.1 The Chairman and the Chief Executive Officer ("CEO") are separate persons to ensure an appropriate balance of power, increased accountability, and greater capacity of the Board for independent decision making9.
        3.2 The Board establishes and sets out in writing the division of responsibilities between the Chairman and the CEO.
        3.3 The Board has a lead independent director to provide leadership in situations where the Chairman is conflicted, and especially when the Chairman is not independent. The lead independent director is available to shareholders where they have concerns and for which contact through the normal channels of communication with the Chairman or Management are inappropriate or inadequate.

        BOARD MEMBERSHIP

        Principle:

        4 The Board has a formal and transparent process for the appointment and re-appointment of directors, taking into account the need for progressive renewal of the Board.

        Provisions:

        4.1 The Board establishes a Nominating Committee ("NC")10 to make recommendations to the Board on relevant matters relating to:
        (a) the review of succession plans for directors, in particular the appointment and/or replacement of the Chairman, the CEO and key management personnel11;
        (b) the process and criteria for evaluation of the performance of the Board, its board committees and directors;
        (c) the review of training and professional development programmes for the Board and its directors; and
        (d) the appointment and re-appointment12 of directors (including alternate directors, if any)13.
        4.2 The NC comprises at least three directors, the majority of whom, including the NC Chairman, are independent. The lead independent director, if any, is a member of the NC.
        4.3 The company discloses the process for the selection, appointment and re-appointment of directors to the Board, including the criteria used to identify and evaluate potential new directors and channels used in searching for appropriate candidates in the company's annual report.
        4.4 The NC determines annually, and as and when circumstances require, if a director is independent, having regard to the circumstances set forth in Provision 2.1. Directors disclose their relationships with the company, its related corporations, its substantial shareholders or its officers, if any, which may affect their independence14, to the Board. If the Board, having taken into account the views of the NC, determines that such directors are independent notwithstanding the existence of such relationships, the company discloses the relationships and its reasons in its annual report.
        4.5 The NC ensures that new directors are aware of their duties and obligations. The NC also decides if a director is able to and has been adequately carrying out his or her duties as a director of the company. The company discloses in its annual report the listed company directorships and principal commitments15 of each director, and where a director holds a significant number of such directorships and commitments, it provides the NC's and Board's reasoned assessment of the ability of the director to diligently discharge his or her duties.

        BOARD PERFORMANCE

        Principle:

        5 The Board undertakes a formal annual assessment of its effectiveness as a whole, and that of each of its board committees and individual directors.

        Provisions:

        5.1 The NC recommends for the Board's approval the objective performance criteria and process for the evaluation of the effectiveness of the Board as a whole, and of each board committee separately, as well as the contribution by the Chairman and each individual director to the Board.
        5.2 The company discloses in its annual report how the assessments of the Board, its board committees and each director have been conducted, including the identity of any external facilitator and its connection, if any, with the company or any of its directors.

        2 Rule 210(5)(a) of the SGX Listing Rules (Mainboard) / Rule 406(3)(a) of the SGX Listing Rules (Catalist) requires any director who has had no prior experience as a director of a listed company to undergo training in the roles and responsibilities of a listed company director.

        3 Rule 1207(10B) of the SGX Listing Rules (Mainboard) / Rule 1204(10B) of the SGX Listing Rules (Catalist) requires the Board to identify in the company's annual report each director it considers to be independent.

        4 The term "related corporation", in relation to the company, has the same meaning as currently defined in the Companies Act (Chapter 50) of Singapore, i.e. a corporation that is the company's holding company, subsidiary or fellow subsidiary.

        5 A "substantial shareholder" is a shareholder who has an interest or interests in one or more voting shares (excluding treasury shares) in the company and the total votes attached to that share, or those shares, is not less than 5% of the total votes attached to all voting shares (excluding treasury shares) in the company, in line with the definition set out in section 2 of the Securities and Futures Act (Chapter 289) of Singapore.

        6 A director who falls under the circumstances described in Rule 210(5)(d) of the SGX Listing Rules (Mainboard) / Rule 406(3)(d) of the SGX Listing Rules (Catalist) is not independent. These circumstances apply to the following: (i) a director being employed by the company or any of its related corporations for the current or any of the past three financial years; (ii) a director who has an immediate family member who is, or has been in any of the past three financial years, employed by the company or any of its related corporations and whose remuneration is determined by the Remuneration Committee; (iii) a director who has been a director for an aggregate period of more than 9 years (whether before or after listing) and whose continued appointment as an independent director has not been sought and approved in separate resolutions by (A) all shareholders; and (B) all shareholders, excluding shareholders who also serve as the directors or the chief executive officer of the company, and associates of such directors and chief executive officers. Rule 210(5)(d)(i) and (ii) of the SGX Listing Rules (Mainboard) / Rule 406(3)(d)(i) and (ii) of the SGX Listing Rules (Catalist) come into effect from 1 January 2019. Rule 210(5)(d)(iii) of the SGX Listing Rules (Mainboard) and Rule 410(3)(d)(iii) will come into effect on 1 January 2022. Prior to 1 January 2022, the corresponding Guideline 2.4 in the 2012 Code of Corporate Governance will continue to apply.

        7 Rule 210(5)(c) of the SGX Listing Rules (Mainboard) / Rule 406(3)(c) of the SGX Listing Rules (Catalist) requires independent directors to make up at least one-third of the Board. This rule will be come into effect on 1 January 2022. Prior to 1 January 2022, the corresponding Guideline 2.1 in the 2012 Code of Corporate Governance will continue to apply.

        8 The Chairman is not independent when (i) he or she is not an independent director, (ii) he or she is also the CEO, (iii) he or she and the CEO are immediate family members as defined in the Listing Manual of the Singapore Exchange (i.e. the person's spouse, child, adopted child, step-child, brother, sister and parent), (iv) he or she and the CEO have close family ties with each other (i.e. a familial relationship between two parties which extends beyond immediate family members and could influence the impartiality of the Chairman) as determined by the Nominating Committee, or (v) he or she is part of the Management team.

        9 Rule 1207(10A) of the SGX Listing Rules (Mainboard) / Rule 1204(10A) of the SGX Listing Rules (Catalist) requires the Board to disclose the relationship between the Chairman and the CEO if they are immediate family members.

        10 Rule 210(5)(e) of the SGX Listing Rules (Mainboard) / Rule 406(3)(e) of the SGX Listing Rules (Catalist) requires companies to establish one or more committees as may be necessary to perform the functions of an Audit Committee, a Nominating Committee and a Remuneration Committee. Each committee formed has written terms of reference which clearly set out the authority and duties of the committee.

        11 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.

        12 Rule 720(5) of the SGX Listing Rules (Mainboard) / Rule 720(4) of the SGX Listing Rules (Catalist) requires all directors to submit themselves for re-nomination and re-election at least once every three years.

        13 Rule 720(6) of the SGX Listing Rules (Mainboard) / Rule 720(5) of the SGX Listing Rules (Catalist) requires key information on directors to be provided together with each resolution on the proposed appointment or re-appointment of directors.

        14 Such relationships include business relationships which the director, his or her immediate family member, or an organisation which the director, or his or her immediate family member is a substantial shareholder, partner (with 5% or more stake), executive officer or director in has with the company or any of its related corporations, and the director's direct association with a substantial shareholder of the company, in the current and immediate past financial year. Where the director or his or her immediate family member, or a company that he, she or they are a substantial shareholder in, provides to or receives from the company or its subsidiaries any significant payments or material services, the amount and nature of the service is disclosed.

        15 The term "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.

      • Remuneration Matters

        PROCEDURES FOR DEVELOPING REMUNERATION POLICIES

        Principle:

        6 The Board has a formal and transparent procedure for developing policies on director and executive remuneration, and for fixing the remuneration packages of individual directors and key management personnel. No director is involved in deciding his or her own remuneration.

        Provisions:

        6.1 The Board establishes a Remuneration Committee ("RC")16 to review and make recommendations to the Board on:
        (a) a framework of remuneration for the Board and key management personnel; and
        (b) the specific remuneration packages for each director as well as for the key management personnel.
        6.2 The RC comprises at least three directors. All members of the RC are non-executive directors, the majority of whom, including the RC Chairman, are independent.
        6.3 The RC considers all aspects of remuneration, including termination terms, to ensure they are fair.
        6.4 The company discloses the engagement of any remuneration consultants and their independence in the company's annual report.

        LEVEL AND MIX OF REMUNERATION

        Principle:

        7 The level and structure of remuneration of the Board and key management personnel are appropriate and proportionate to the sustained performance and value creation of the company, taking into account the strategic objectives of the company.

        Provisions:

        7.1 A significant and appropriate proportion of executive directors' and key management personnel's remuneration is structured so as to link rewards to corporate and individual performance. Performance-related remuneration is aligned with the interests of shareholders and other stakeholders and promotes the long-term success of the company.
        7.2 The remuneration of non-executive directors is appropriate to the level of contribution, taking into account factors such as effort, time spent, and responsibilities.
        7.3 Remuneration is appropriate to attract, retain and motivate the directors to provide good stewardship of the company and key management personnel to successfully manage the company for the long term.

        DISCLOSURE ON REMUNERATION

        Principle:

        8 The company is transparent on its remuneration policies, level and mix of remuneration, the procedure for setting remuneration, and the relationships between remuneration, performance and value creation.

        Provisions:

        8.1 The company discloses in its annual report the policy and criteria for setting remuneration, as well as names, amounts and breakdown of remuneration of:
        (a) each individual director and the CEO; and
        (b) at least the top five key management personnel (who are not directors or the CEO) in bands no wider than S$250,000 and in aggregate the total remuneration paid to these key management personnel.
        8.2 The company discloses the names and remuneration of employees who are substantial shareholders of the company, or are immediate family members of a director, the CEO or a substantial shareholder of the company, and whose remuneration exceeds S$100,000 during the year, in bands no wider than S$100,000, in its annual report. The disclosure states clearly the employee's relationship with the relevant director or the CEO or substantial shareholder.
        8.3 The company discloses in its annual report all forms of remuneration and other payments and benefits, paid by the company and its subsidiaries to directors and key management personnel of the company. It also discloses details of employee share schemes.

        16 Rule 210(5)(e) of the SGX Listing Rules (Mainboard) / Rule 406(3)(e) of the SGX Listing Rules (Catalist) requires companies to establish one or more committees as may be necessary to perform the functions of an Audit Committee, a Nominating Committee and a Remuneration Committee. Each committee formed should have written terms of reference which clearly set out the authority and duties of the committee.

      • Accountability and Audit

        RISK MANAGEMENT AND INTERNAL CONTROLS

        Principle:

        9 The Board is responsible for the governance of risk and ensures that Management maintains a sound system of risk management and internal controls, to safeguard the interests of the company and its shareholders17.

        Provisions:

        9.1 The Board determines the nature and extent of the significant risks which the company is willing to take in achieving its strategic objectives and value creation. The Board sets up a Board Risk Committee to specifically address this, if appropriate.
        9.2 The Board requires and discloses in the company's annual report that it has received assurance from:
        (a) the CEO and the Chief Financial Officer ("CFO") that the financial records have been properly maintained and the financial statements give a true and fair view of the company's operations and finances; and
        (b) the CEO and other key management personnel who are responsible, regarding the adequacy and effectiveness of the company's risk management and internal control systems.

        AUDIT COMMITTEE

        Principle:

        10 The Board has an Audit Committee ("AC")18 which discharges its duties objectively.

        Provisions:

        10.1 The duties of the AC include:
        (a) reviewing the significant financial reporting issues and judgements so as to ensure the integrity of the financial statements of the company and any announcements relating to the company's financial performance;
        (b) reviewing at least annually the adequacy and effectiveness of the company's internal controls and risk management systems;
        (c) reviewing the assurance from the CEO and the CFO on the financial records and financial statements;
        (d) making recommendations to the Board on: (i) the proposals to the shareholders on the appointment and removal of external auditors; and (ii) the remuneration and terms of engagement of the external auditors;
        (e) reviewing the adequacy, effectiveness, independence, scope and results of the external audit and the company's internal audit function; and
        (f) reviewing the policy and arrangements for concerns about possible improprieties in financial reporting or other matters to be safely raised, independently investigated and appropriately followed up on. The company publicly discloses, and clearly communicates to employees, the existence of a whistle-blowing policy and procedures for raising such concerns.
        10.2 The AC comprises at least three directors, all of whom are non-executive and the majority of whom, including the AC Chairman, are independent. At least two members, including the AC Chairman, have recent and relevant accounting or related financial management expertise or experience.
        10.3 The AC does not comprise former partners or directors of the company's existing auditing firm or auditing corporation: (a) within a period of two years commencing on the date of their ceasing to be a partner of the auditing firm or director of the auditing corporation; and in any case, (b) for as long as they have any financial interest in the auditing firm or auditing corporation.
        10.4 The primary reporting line of the internal audit function is to the AC, which also decides on the appointment, termination and remuneration of the head of the internal audit function. The internal audit function has unfettered access to all the company's documents, records, properties and personnel, including the AC, and has appropriate standing within the company.
        10.5 The AC meets with the external auditors, and with the internal auditors, in each case without the presence of Management, at least annually.

        17 Rule 610(5) and Rule 719(1) of the SGX Listing Rules (Mainboard) / Rule 407(4)(b) and Rule 719(1) of the SGX Listing Rules (Catalist) require the Board to comment on the adequacy and effectiveness of the company's internal controls and risk management systems, and the AC's concurrence with the Board's comments. Where either the Board or the AC comments that the issuer's group's internal controls or risk management systems have weaknesses, the issuer must provide clear disclosure on the weaknesses and the steps taken to address them.

        18 Rule 210(5)(e) of the SGX Listing Rules (Mainboard) / Rule 406(3)(e) of the SGX Listing Rules (Catalist) requires companies to establish one or more committees as may be necessary to perform the functions of an audit committee, a nominating committee and a remuneration committee. Each committee formed should have written terms of reference which clearly set out the authority and duties of the committee.

      • Shareholder Rights and Engagement

        SHAREHOLDER RIGHTS AND CONDUCT OF GENERAL MEETINGS

        Principle:

        11 The company treats all shareholders fairly and equitably in order to enable them to exercise shareholders' rights and have the opportunity to communicate their views on matters affecting the company. The company gives shareholders a balanced and understandable assessment of its performance, position and prospects.

        Provisions:

        11.1 The company provides shareholders with the opportunity to participate effectively in and vote at general meetings of shareholders and informs them of the rules governing general meetings of shareholders.
        11.2 The company tables separate resolutions at general meetings of shareholders on each substantially separate issue unless the issues are interdependent and linked so as to form one significant proposal. Where the resolutions are "bundled", the company explains the reasons and material implications in the notice of meeting.
        11.3 All directors attend general meetings of shareholders, and the external auditors are also present to address shareholders' queries about the conduct of audit and the preparation and content of the auditors' report. Directors' attendance at such meetings held during the financial year is disclosed in the company's annual report.
        11.4 The company's Constitution (or other constitutive documents) allow for absentia voting at general meetings of shareholders.
        11.5 The company publishes minutes of general meetings of shareholders on its corporate website as soon as practicable. The minutes record substantial and relevant comments or queries from shareholders relating to the agenda of the general meeting, and responses from the Board and Management.
        11.6 The company has a dividend policy and communicates it to shareholders19.

        ENGAGEMENT WITH SHAREHOLDERS

        Principle:

        12 The company communicates regularly with its shareholders and facilitates the participation of shareholders during general meetings and other dialogues to allow shareholders to communicate their views on various matters affecting the company.

        Provisions:

        12.1 The company provides avenues for communication between the Board and all shareholders, and discloses in its annual report the steps taken to solicit and understand the views of shareholders.
        12.2 The company has in place an investor relations policy which allows for an ongoing exchange of views so as to actively engage and promote regular, effective and fair communication with shareholders.
        12.3 The company's investor relations policy sets out the mechanism through which shareholders may contact the company with questions and through which the company may respond to such questions.

        19 Rule 704(24) SGX Listing Rules (Mainboard)/ Rule 704(23) of the SGX Listing Rules (Catalist) requires that in the event that the Board decides not to declare or recommend a dividend, the company must expressly disclose the reason(s) for the decision together with the announcement of the financial statements.

      • Managing Stakeholders Relationships

        Engagement with Stakeholders

        Principle:

        13 The Board adopts an inclusive approach by considering and balancing the needs and interests of material stakeholders, as part of its overall responsibility to ensure that the best interests of the company are served.

        Provisions:

        13.1 The company has arrangements in place to identify and engage with its material stakeholder groups and to manage its relationships with such groups.
        13.2 The company discloses in its annual report its strategy and key areas of focus in relation to the management of stakeholder relationships during the reporting period.
        13.3 The company maintains a current corporate website to communicate and engage with stakeholders.
      • Practice Guidance

        • Practice Guidance 1: Board Roles and Director Duties

          Board's Role

          The Board's role is to:

          (a) provide entrepreneurial leadership, and set strategic objectives, which should include appropriate focus on value creation, innovation and sustainability;
          (b) ensure that the necessary resources are in place for the company to meet its strategic objectives;
          (c) establish and maintain a sound risk management framework to effectively monitor and manage risks, and to achieve an appropriate balance between risks and company performance;
          (d) constructively challenge Management and review its performance;
          (e) instil an ethical corporate culture and ensure that the company's values, standards, policies and practices are consistent with the culture; and
          (f) ensure transparency and accountability to key stakeholder groups.

          Scope of Director Duties

          Directors should be aware of their duties at law, which includes acting in good faith and the best interests of the company; exercising due care, skills and diligence; and avoiding conflicts of interest. Directors should also put in place policies, structures and mechanisms to ensure compliance with legislative and regulatory requirements, establish appropriate tone-at-the-top, desired organisational culture and standards of ethical behaviour.

          While the duties imposed by law are the same for all directors, a listed Board will generally have different classes of directors (executive, non-executive and independent directors) with different roles:

          •   Executive Directors (EDs) are usually members of senior management, and involved in the day-to-day running of the business. Executive directors are expected to:
          (a) provide insights on the company's day-to-day operations, as appropriate;
          (b) provide Management's views without undermining management accountability to the Board; and
          (c) collaborate closely with non-executive directors for the long term success of the company.
          •   Non-Executive Directors (NEDs) are not part of Management. They are not employees of the company and do not participate in the company's day-to-day management. NEDs are expected to:
          (a) be familiar with the business and stay informed of the activities of the company;
          (b) constructively challenge Management and help develop proposals on strategy;
          (c) review the performance of Management in meeting agreed goals and objectives; and
          (d) participate in decisions on the appointment, assessment and remuneration of the executive directors and key management personnel generally.
          •   Independent Directors (IDs) are NEDs who are deemed independent by the Board (see Provision 2.1 and Practice Guidance 2 on criteria for director independence). IDs have the duties of the NEDs, and additionally provide an independent and objective check on Management. In certain cases, the SGX Listing Rules require IDs to make certain decisions and determinations. However, IDs should avoid focusing solely on the duties relating to compliance with rules. As with all directors, they are to act in the best interests of the company as a whole and not of any particular group of shareholders or stakeholders.

          Conflicts of Interest

          The Board should have clear policies and procedures for dealing with conflicts of interest. Where the director faces a conflict of interest, he or she should disclose this and recuse himself or herself from meetings and decisions involving the issue. For instance, if the Chairman of the Board (Chairman) is a member of the Nominating Committee (NC), he or she may face a conflict of interest on discussions relating to the succession of the Chairman and should thus recuse himself or herself from such discussions after providing his or her input to the NC on other matters.

          Director Competencies

          There should be formal communication from the company to each of the directors on their appointment and their roles, duties, obligations and responsibilities, and the expectations of the company. This includes each director developing his or her competencies to effectively discharge his or her duties.

          To ensure that directors have the opportunities to develop their skills and knowledge, the Board should develop a policy and criteria for directors' development. The Chairman and the NC Chairman should jointly and regularly review and agree with each director his or her training and professional development needs.

          Board Organisation and Support

          The Board may form board committees, and decide the scope and the matters delegated to the board committees. Generally, all important decisions should be made at the Board level.

          If the Board chooses to form an executive committee (EXCO) and delegate certain matters for the EXCO to decide, it is responsible for understanding the EXCO's discussions and endorsing the EXCO's decisions.

          Management provides the Board with information for its meetings and decision making, including board papers and supporting information. In respect of budgets, any material variance between the projections and actual results should also be disclosed and explained.

          Relying purely on what is volunteered by Management is unlikely to be enough in all circumstances and further enquiries may be required if the director is to fulfil his or her duties properly. Directors are entitled to request from Management and should be provided with such additional information as needed to make informed decisions. Management should provide the information in a timely manner.

          The Board should be supported by the company secretary, whose role should be clearly defined. The company secretary's responsibilities include advising the Board on corporate and administrative matters, as well as facilitating orientation and assisting with professional development as required. The company secretary should attend all board meetings.

        • Practice Guidance 2: Board Composition and Guidance

          Director Independence

          There should be a strong and independent element on the Board.

          An independent director (ID) should have no relationship (whether familial, business, financial, employment, or otherwise) with the company, its related corporations, substantial shareholders1 or officers, which could interfere or be perceived to interfere with the director's independent judgment.

          Rule 210(5)(d) of the SGX Listing Rules (Mainboard)/ Rule 406(3)(d) of the SGX Listing Rules (Catalist) sets out the following specific circumstances in which a director should be deemed to be non-independent:

          (a) a director who is being employed by the company or any of its related corporations for the current or any of the past three financial years;
          (b) a director who has an immediate family member who is, or has been in any of the past three financial years, employed by the company or any of its related corporations and whose remuneration is determined by the Remuneration Committee (RC);
          (c) a director who has been a director on the Board for an aggregate period of more than nine years (whether before or after listing) and whose continued appointment as an independent director has not been sought and approved in separate resolutions by (i) all shareholders and (ii) all shareholders excluding shareholders who also serve as the directors or chief executive officer (and their associates).

          In addition to these, the Nominating Committee (NC) and Board should consider the following circumstances in which a director should also be deemed to be non-independent:

          (a) a director, or a director whose immediate family member, in the current or immediate past financial year, provided to or received from the company or any of its subsidiaries any significant payments or material services (which may include auditing, banking, consulting and legal services), other than compensation for board service. The amount and nature of the service, and whether it is provided on a one-off or recurring basis, are relevant in determining whether the service provided is material. As a guide, payments aggregated over any financial year in excess of S$50,000 should generally be deemed significant;
          (b) a director, or a director whose immediate family member, in the current or immediate past financial year, is or was, a substantial shareholder or a partner in (with 5% or more stake), or an executive officer of, or a director of, any organisation which provided to or received from the company or any of its subsidiaries any significant payments or material services (which may include auditing, banking, consulting and legal services). The amount and nature of the service, and whether it is provided on a one-off or recurring basis, are relevant in determining whether the service provided is material. As a guide, payments2 aggregated over any financial year in excess of S$200,000 should generally be deemed significant irrespective of whether they constitute a significant portion of the revenue of the organisation in question; or
          (c) a director who is or has been directly associated3 with a substantial shareholder of the company, in the current or immediate past financial year.

          The above examples are not exhaustive and the NC and Board should determine whether there is any circumstance or relationship which might impact a director's independence, or the perception of his or her independence. Other than the circumstances set out in the SGX Listing Rules, these examples are meant to illustrate situations of likely non-independence and the NC and Board can still consider a director to be independent notwithstanding the existence of any of the above-mentioned situations. However, if the Board, having taking into account the view of the NC, does so, it has to fully disclose the nature of the director's relationship, and why the Board has determined the director to be independent.

          Proportion of Non-Executive Directors

          A key duty of the Board is to set objectives and goals for Management, monitor the results, and assess and remunerate Management on its performance. Executive directors who are part of Management may face conflicts of interest in these areas. To avoid undue influence of Management over the Board and ensure that appropriate checks and balances are in place, non-executive directors should comprise at least a majority of the Board.

          Role of the Lead Independent Director

          The lead independent director (Lead ID) plays an additional facilitative role within the Board, and where necessary, he or she may also facilitate communication between the Board and shareholders or other stakeholders of the company. The company should clearly communicate to shareholders and other stakeholders on how the Lead ID can be contacted.

          The role of the Lead ID may include chairing Board meetings in the absence of the Chairman, working with the Chairman in leading the Board, and providing a channel to non-executive directors for confidential discussions on any concerns and to resolve conflicts of interest as and when necessary. In addition, the Lead ID may also help the NC conduct annual performance evaluation and develop succession plans for the Chairman and CEO and help the RC design and assess the Chairman's remuneration.

          Board Diversity Policy

          The Board is responsible for setting the board diversity policy, including qualitative and measurable quantitative objectives (where appropriate). It may charge an appropriate committee (such as the NC) with the task of setting these objectives for achieving board diversity, and reviewing the company's progress towards achieving these objectives.


          1 A "substantial shareholder" is a shareholder who has an interest or interests in one or more voting shares (excluding treasury shares) in the company and the total votes attached to that share, or those shares, is not less than 5% of the total votes attached to all voting shares (excluding treasury shares) in the company, in line with the definition set out in section 2 of the Securities and Futures Act (Chapter 289) of Singapore.

          2 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.

          3 A director is considered "directly associated" with a substantial shareholder when he is accustomed or under the obligation, whether formal or informal, to act in accordance with the directions, instructions or wishes of the substantial shareholder in relation to the corporate affairs of the company. A director will not be considered "directly associated" with a substantial shareholder by reason only of his or her appointment having been proposed by that substantial shareholder.

        • Practice Guidance 3: Chairman and CEO

          The separation of the role of the Chairman of the Board (Chairman) from that of the Chief Executive Officer (CEO) avoids concentration of power in one individual, and ensures a degree of checks and balances. Where the Nominating Committee determines that the Chairman and CEO share close family ties, the Chairman is not independent. Such ties include familial relationships beyond immediate family members that could influence the impartiality of the Chairman. Examples of these relationships include those of in-laws, cousins, aunts, uncles and grandparents.

          The overall role of the Chairman is to lead and ensure the effectiveness of the Board. This includes:

          (a) promoting a culture of openness and debate at the Board;
          (b) facilitating the effective contribution of all directors; and
          (c) promoting high standards of corporate governance.

          Externally, the Chairman is the face of the Board, and should ensure effective communication with shareholders and other stakeholders.

          Within the company, the Chairman should ensure appropriate relations within the Board, and between the Board and Management, in particular, between the Board and the CEO.

          In the boardroom, the Chairman's responsibilities range from setting the Board agenda and conducting effective Board meetings, to ensuring that the culture in the boardroom promotes open interaction and contributions by all.

        • Practice Guidance 4: Board Membership

          Selection, Appointment and Re-appointment Process

          The process for the selection, appointment and re-appointment of directors should take into consideration the composition and progressive renewal of the Board, as well as each director's competencies, commitment, contribution and performance (e.g. attendance, preparedness, participation and candour) including, if applicable, his or her performance as an independent director (ID).

          To facilitate investors' understanding of its nomination process, the Board should disclose the following:

          (a) the channels used in searching for appropriate candidates, whether through search services or personal networks; and
          (b) the criteria used to identify and evaluate potential new directors, including the relevant experience and skillsets to the company's business which are considered, and whether broader search criteria such as diversity and technological expertise are also included.

          Boards are encouraged to go beyond their immediate circle of contacts, including using third party search firms and institutions, to identify a broader range of suitable candidates.

          The company should disclose how the Board, with its collection of skills, experience and diversity, meets the needs of the company.

          Appointment of Alternate Directors

          A director should take on a directorship appointment only if he or she is able to commit the time to discharge the duties of a director, one of which includes attending all Board meetings. Alternate directors1 should only be appointed in exceptional circumstances. In particular, companies should not appoint alternate directors for IDs.

          Alternate directors bear all the duties and responsibilities of a director. All rules and procedures that apply to directors similarly apply to alternate directors.

          Multiple Directorships

          The responsibilities of a director of a listed company are complex and demanding. Directors need to make the substantial time commitment required to fulfill their responsibilities and duties to the company and its shareholders. A director with other major commitments can be, or be perceived to be, ineffective because he or she is unable to allocate sufficient time to properly discharge his or her duties on the Board.

          The Board and Nominating Committee (NC) should therefore take into account the number of directorships and principal commitments of each director in assessing whether he is able to or has been adequately carrying out his or her duties. The Board and NC should establish guidelines on what a reasonable and maximum number of such directorships and principal commitments for each director (or type of director) should be. For instance, directors who are full-time executives could have less capacity to take on listed company directorships, as compared to retirees who may be able to focus entirely on directorships. In addition, an appointment as a non-executive chairman of a listed company would likely require more time and commitment as compared to other non-executive directorships.

          The Board and NC should take into consideration whether a director had previously served on the board of a company with an adverse track record or with a history of irregularities or is or was under investigation by regulators, and seek clarity on the director’s involvement therein. The Board and NC should also assess whether a director’s resignation from the board of any such company casts any doubt on the director’s qualification and ability to act as a director of the Company.

          The Board and NC should also consider other factors in determining the practicality of multiple directorships and principal commitments. For example, scheduling board and committee meetings may be challenging for a director sitting on four boards with similar financial year ends and/or reporting timelines.

          Succession Planning

          Provision 4.1(a) states that the NC should make recommendations to the Board on the review of succession planning for directors, in particular the Chairman and the CEO, as well as key management personnel (KMP).

          It may be the practice in some companies for the CEO to take charge of the succession planning for KMP while the NC takes charge of succession planning for directors, the Chairman and the CEO. In such circumstances, the NC should still review the plans that the CEO has made for KMP succession.

          Also, it may be the practice in some companies for a board committee other than the NC to review succession planning for KMP. The Board, having regard to the particular circumstances of the company, has the prerogative to determine that any other board committee should review the plans made for KMP succession.

          In reviewing succession plans, it is necessary to have in mind the company’s strategic priorities and the factors affecting the long-term success of the company.

          In relation to directors, the NC should aim to maintain an optimal Board composition by considering the trends affecting the company, reviewing the skills needed, and identifying gaps (which includes considering whether there is an appropriate level of diversity of thought). The NC may use these considerations to set appointment criteria for successors.

          In relation to KMP succession, the NC, or such other committee determined by the Board, should take an active interest in how key talent is managed within the organization. The committee can consider reviewing the mechanisms for identifying strong candidates and developing them to take on senior positions in the future.

          Different time horizons should be considered for succession planning as follows: (1) long-term planning, to identify competencies needed for the company’s strategy and objectives, (2) medium-term planning, for the orderly replacement of Board members and KMP, and (3) contingency planning, for preparedness against sudden and unforeseen changes.


          1 An alternate director is generally a person who is appointed to attend Board meetings on behalf of a director when the latter (usually referred to as the principal director) is unable to attend. Section 4(1) of the Companies Act defines a "director" to include alternate directors.

        • Practice Guidance 5: Board Performance

          The Nominating Committee (NC) should decide how the Board's performance may be evaluated and propose objective performance criteria.

          The evaluation should consider the Board's composition (balance of skills, experience, independence, knowledge of the company, and diversity), Board practices and conduct, and how the Board as a whole adds value to the company. The performance criteria should be approved by the Board. The Board should consider the use of peer comparisons and other objective third party benchmarks. These performance criteria should not be changed from year to year, and where circumstances deem it necessary for any of the criteria to be changed, the onus should be on the Board to justify this decision.

          The evaluation of individual director's performance should aim to assess whether each director is willing and able to constructively challenge and contribute effectively to the Board, and demonstrate commitment to his or her roles on the Board (including the roles of Chairman of the Board (Chairman) and chairman of a board committee). The Chairman should act on the results of the performance evaluation, and, in consultation with the NC, propose, where appropriate, new members to be appointed to the Board, or seek the resignation of directors.

          To provide a greater level of objectivity in the evaluation process, the Board may consider the use of external facilitators in the performance assessment. Such facilitators should be independent of the company and its directors.

        • Practice Guidance 6: Procedures for Developing Remuneration Policies

          There should be written terms of reference which clearly spell out authority and duties of the Remuneration Committee (RC). The Board should disclose in the company's annual report the 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. While remuneration matters are deliberated in detail by the RC, its remit is only to make recommendations to the Board in relation to the framework of remuneration for the Board and key management personnel (KMP) and specific remuneration packages for each director and KMP.

          The Board is ultimately accountable for all remuneration decisions. The RC considers all aspects of remuneration (including director's fees, salaries, allowances, bonuses, options, share-based incentives and awards, benefits in kind and termination payments) and should aim to be fair and avoid rewarding poor performance. The RC also reviews the company's obligations arising in the event of termination of the executive directors' and KMP's contracts of service, to ensure that such contracts of service contain fair and reasonable termination clauses which are not overly generous.

          The RC should comprise all non-executive directors, with the majority being independent directors to minimise conflicts of interest. If necessary, the RC should seek expert advice inside and/or outside the company on remuneration. A key aspect of remuneration is benchmarking with comparable organisations. Such data is often not available in-house. Where such advice is obtained, the company should disclose the name and firm of the remuneration consultant, if any, including whether the remuneration consultant has any relationship with the company that could affect his or her independence and objectivity.

        • Practice Guidance 7: Level and Mix of Remuneration

          A company's remuneration framework should be tailored to the specific role and circumstances of each director and key management personnel (KMP). This ensures an appropriate remuneration level and mix that recognises the performance, potential and responsibilities of these individuals.

          Performance-related remuneration schemes should take account of the risk policies of the company, be symmetric with risk outcomes and be sensitive to the time horizon of risks. There should be appropriate and meaningful measures for the purpose of assessing executive directors' and KMP's performance.

          Performance should be measurable, appropriate and meaningful so that they incentivise the right behaviour and values that the company supports. For individuals in control functions (e.g. chief financial officer, chief risk officer, head of the internal audit function), performance measures should be principally based on the achievement of the objectives of their functions. While long-term incentive schemes are generally encouraged for executive directors and KMP, the costs and benefits of such schemes should be carefully evaluated. In normal circumstances, offers of shares or grants of options or other forms of deferred remuneration should vest over a period of time. The use of vesting schedules, whereby only a portion of the benefits can be exercised each year, is strongly encouraged. Executive directors and KMP should be encouraged to hold their shares beyond the vesting period, subject to the need to finance any cost of acquiring the shares and associated tax liability.

          The Remuneration Committee should also consider implementing schemes to encourage non-executive directors (NEDs) to hold shares in the company so as to better align the interests of such NEDs with the interests of shareholders. However, NEDs should not be over-compensated to the extent that their independence may be compromised.

          Companies should consider the use of contractual provisions to allow them to reclaim incentive components of remuneration from executive directors and KMP in exceptional circumstances, including for example, misstatement of financial results or misconduct resulting in financial loss to the company.

        • Practice Guidance 8: Disclosure on Remuneration

          A company's annual remuneration report should form part of, or be annexed to, the company's annual report. It should be the main means through which the company reports to shareholders on all forms of remuneration and other payments and benefits, for directors and key management personnel (KMP), from itself and its subsidiaries, in respect of the financial year reported on. Companies should make the disclosure regardless of whether shareholder approval has been obtained.

          Remuneration disclosures for individual directors and the Chief Executive Officer (CEO) should specify the names, amounts and breakdown of remuneration.

          Remuneration disclosures for at least the top five KMP (who are not directors or the CEO) should specify the names, amounts and breakdown of remuneration in bands no wider than S$250,000 (refer to illustrative examples below).

          A breakdown (in percentage terms) of the remuneration earned by each director, the CEO and each of at least the top five KMP (who are not directors or the CEO) should include 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. The disclosures on employee share schemes should cover the important terms such as the potential size of grants, methodology of valuing stock options, exercise price of options that were granted as well as outstanding, whether the exercise price was at the market or otherwise on the date of grant, market price on the date of exercise, the vesting schedule, and the justifications for the terms adopted.

          In addition to the disclosure in aggregate of the total remuneration paid to at least the top five KMP (who are not directors or the CEO), the aggregate amount of any termination, retirement and post-employment benefits that may be granted to directors, the CEO and at least the top five KMP (who are not directors or the CEO) should be separately disclosed. In the case of a company with less than five KMP (who are not directors or the CEO), it is acceptable for the company to make the disclosure in respect of all KMP, with the appropriate explanation.

          For administrative convenience, the company may round off the disclosed figures to the nearest thousand dollars. The disclosure of remuneration may be in bands no wider than S$250,000 for at least top five KMPs; and no wider than S$100,000 for employees who are substantial shareholders, or are immediate family members of a director, the CEO or a substantial shareholder.

          Illustrative Examples of Banding:

          A company has five KMP: V, W, X, Y and Z. The KMPs' remuneration are as follows: V is paid S$300,000; W is paid SS300,000; X is paid S$540,000; Y is paid S$650,000; and Z is paid S$1,005,000.

          Applicable bands Top 5 KMP
          ≥S$1,000,001–S$1,250,000 Z
          ≥S$500,001–S$750,000 X, Y
          ≥S$250,000–S$500,000 V, W

          Disclosure of Relationships between Remuneration, Performance and Value Creation

          To facilitate better understanding of the relationships between remuneration, performance and value creation, companies should adopt and disclose the following information:

          •   the company's definition of value creation for its stakeholders (including shareholders and other material stakeholders) and how it is measured;
          •   the process for formulating the remuneration policies, including the governance of the process;
          •   the way that remuneration is designed to drive corporate performance, including a description of why the indicators chosen are relevant to the company in the context of their strategy, or their desire to create value and generate shareholder returns;
          •   the way that remuneration is used to manage risk (e.g. remuneration that does not generate excessive risk taking and envisages reductions to remuneration for exceeding agreed risk limits);
          •   the way that performance is measured, including the types of financial and non-financial metrics adopted (e.g. Earnings Per Share (EPS), Total Shareholder Returns (TSR), Return On Equity (ROE), customer metrics, operational metrics, safety metrics);
          •   the way that personal performance is assessed and taken into account (e.g. the way that the officers create an appropriate work culture in the company, and the contributions of such officers to succession planning, and engagement with the regulatory authorities in the relevant industries in which the company operates in);
          •   the breakdown of those metrics as part of variable remuneration (e.g. 80% financial metrics split across 33% EPS, 33% TSR and 33% ROE; 20% non-financial metrics split across 40% Customer Satisfaction, 40% Safety Performance and 20% Employee Engagement);
          •   the metrics used, and why the metrics are appropriate (e.g. EPS growth of 6% compound, TSR of top quartile, ROE of 8%, zero Lost Time Injuries, 90% On Time Performance), including whether relative performance is measured against peers;
          •   the periods over which performance is assessed (e.g. three year performance period), including justification for why a shorter-term performance period is used for a long-term incentive plan, in instances where this is the case;
          •   payouts that can be achieved for hitting or exceeding these targets (e.g. 100% payout for median performance, 150% payout for top quartile, 50% payout for 90-percentile performance);
          •   the form of the payout, (e.g. whether in the form of shares or cash), along with holding periods, if any, for shares;
          •   the breakdown in company and individual performance outcomes and actual remuneration paid, including explanations where company and/or individual performance outcomes were not achieved yet remuneration was not adjusted in line with the remuneration policy;
          •   where discretion can be exercised by the Board and/or Remuneration Committee in determining the relationship between remuneration, performance and value creation;
          •   the existence of any gateways (or negative indicators) to pay-outs (e.g. whether, if the company received a highly critical regulatory report, long term incentives would nevertheless be fully payable because of achievement of profitability metrics); and
          •   the existence and structure of any clawbacks for malfeasance.
        • Practice Guidance 9: Risk Management and Internal Controls

          The Board is responsible for the governance of risk, including determining the nature and extent of the significant risks which the company is willing to take.

          The Board oversees the company's risk management framework and policies, and ensures that Management maintains a sound system of risk management and internal controls.

          The Board may delegate responsibility for risk governance to a board committee, such as the Audit Committee or a separate Board Risk Committee.

          The Board, with the assistance of a board committee (where established), should review, at least annually, the adequacy and effectiveness of the company's risk management and internal control systems and comment4 on the same in the company's annual report. Such a review can be carried out internally or with the assistance of any competent third parties.

          The Board's commentary in the company's annual report should include:

          (a) information needed by stakeholders to make an informed assessment of the company's risk management and internal control systems;
          (b) a description of the principal risks (including financial, operational, compliance and information technology risk categories) facing the company and how they are being managed or mitigated;
          (c) an explanation of the company's approach towards identifying, measuring and monitoring its key and emerging risks, and an elaboration of its approach towards the governance and management of these risks; and
          (d) an explanation of how the Board has assessed the prospects of the company, over what period it has done so, and why the Board considers it to be appropriate to use that period.

          4 Refer to Rules 610(5) and 1207(10) of the SGX Listing Rules (Mainboard) / Rules 407(4)(b) and 1204(10) of the SGX Listing Rules (Catalist); Main Board Practice Note 12.2/ Catalist Practice Note 21B—Internal Controls and Risk Management Systems.

        • Practice Guidance 10: Audit Committees

          There should be written terms of reference which clearly spell out the authority and duties of the Audit Committee. The Board should disclose in the company's annual report the 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.

          The AC should have explicit authority to investigate any matter within its terms of reference, full access to and co-operation by Management, full discretion to invite any director or executive officer to attend its meetings, and reasonable resources to enable it to discharge its functions.

          In respect of appointments and re-appointments of external auditors, the AC should evaluate the performance of the external auditor, taking into consideration the Audit Quality Indicators Disclosure Framework published by the Accounting and Corporate Regulatory Authority (ACRA).

          The AC should make recommendations to the Board on establishing an adequate, effective and independent internal audit function. For the avoidance of doubt, the internal audit function can be in-house, outsourced to a reputable accounting/auditing firm or corporation, or performed by a major shareholder, holding company or controlling enterprise with an internal audit staff.

          The AC should ensure that the internal audit function is adequately resourced and staffed with persons with the relevant qualifications and experience. The AC should also ensure that the internal auditors comply with the standards set by nationally or internationally recognised professional bodies.

          The AC should report to the Board how it has discharged its responsibilities and whether it was able to discharge its duties independently. The activities the ACs should report to the Board include:

          (a) the significant issues and judgements that the AC considered in relation to the financial statements, and how these issues were addressed. Where the external auditors, in their review or audit of the company's year-end financial statements, raise any significant issues (e.g. significant adjustments) which have a material impact on the interim financial statements or financial updates previously announced by the company, the AC should bring this to the Board's attention immediately1. The AC should also advise the Board if changes are needed to improve the quality of future interim financial statements or financial updates2, and;
          (b) the AC's assessment of the adequacy and effectiveness of internal controls and risk management systems;
          (c) the AC's assessment of the adequacy, effectiveness and independence of the internal audit function;
          (d) the AC's assessment of the independence and objectivity of the external auditors, taking into consideration the requirements under the Accountants Act (Chapter 2) of Singapore, including but not limited to, the aggregate and respective fees paid for audit and non-audit services and the cooperation extended by Management to allow an effective audit;
          (e) the AC's assessment of the quality of the work carried out by the external auditors, and the basis of such assessment, such as the use of ACRA's Audit Quality Indicators Disclosure Framework;
          (f) the significant matters raised through the whistle-blowing channel.

          1 The Board should then consider whether an immediate announcement is required under Rule 703 of the SGX Listing Rules (Mainboard) / Rule 703 of the SGX Listing Rules (Catalist).

          2 Such changes (if any) should be disclosed in the company's annual report.

        • Practice Guidance 11: Shareholder Rights and Engagement

          While companies are required to meet the minimum notice period for general meetings, companies should consider providing longer notice for meetings, especially when dealing with complex transactions, or where the company has numerous overseas shareholders.

          Management is encouraged to make a presentation to shareholders to update them on the company's performance, position and prospects at general meetings. Presentation materials should be made available on SGXNET and the company's website for the benefit of shareholders.

          In order to enhance shareholder participation in general meetings, companies should use their best endeavours to avoid scheduling meetings during peak periods when the meetings may coincide with those of other companies, especially if they have a large shareholder base. Companies should consider other avenues of engaging shareholders, such as through townhall meetings, briefings and roadshows, or webcasting meetings and allowing electronic online voting of shares.

          In general, resolutions should not be bundled or made inter-conditional on each other. This is to ensure that shareholders are given the right to express their views and exercise their voting rights on each resolution separately. However, in situations where resolutions have to be inter-conditional (such as in meetings to approve a reverse takeover), the company should provide clear explanations.

          Companies should provide the necessary information on each resolution to enable shareholders to exercise their vote on an informed basis. For resolutions on the election or re-election of directors, companies should provide sufficient information on the background of directors, their contributions to the company, and the board and committee positions they are expected to hold upon election.

          Directors should be present for the entire duration of general meetings. The Chairman of the meeting should facilitate constructive dialogue between shareholders and the Board, Management, external auditors and other relevant professionals. The Chairman should allow specific directors, such as board committee chairs or the lead independent director, to answer queries on matters related to their roles.

          Directors should take the opportunity to interact with shareholders before and/or after general meetings.

        • Practice Guidance 12: Engagement with Shareholders

          Companies should engage the shareholders on whether the company should voluntarily announce interim updates on useful and relevant information in addition to the mandatory financial statements. Information which shareholders would find useful include: a discussion of the significant factors that affected the company's interim performance, relevant market trends including the risks and opportunities that may have a material impact on the company's prospects. Such information provides shareholders a better understanding of the company's performance in the context of the current business environment. The Board should then consider whether interim updates should be provided to shareholders, and the appropriate frequency of the updates.

          Companies should provide a specific investor relations contact, such as an online submission form, email address or contact number, through which shareholders are able to ask questions and receive responses in a timely manner. Where the company has a lead independent director (Lead ID), the company should provide information as to how shareholders can contact the Lead ID directly, rather than having to go through the company.

        • Practice Guidance 13: Managing Stakeholder Relationships

          In the execution of its duties, the Board should not only consider the company's obligations to its shareholders but also the interests of its material stakeholders. The relationships with material stakeholders may have an impact on the company's long term sustainability.

          Stakeholders are parties who may be affected by the company's activities, or whose actions can affect the ability of the company to conduct its activities. The Board should determine the relevant stakeholders, and set policies in relation to material stakeholders identified.

          It is accepted practice for sustainability reports to be used to engage stakeholders. The results of such engagements could also inform the contents of these reports.

      • Download in PDF

        Please click here to view the Code of Corporate Governance 2018.

        Please click here to view the Practice Guidance.