Focus on corporate governance; S’pore updating Companies Act: Lim Hwee Hua
(SINGAPORE) Think of the huge fraudulent trading losses at Societe Generale. Or think of the sub-prime mortgage fallout. The recent crises that have rocked the financial sector have also brought corporate governance under the spotlight, Minister of State for Finance and Transport Lim Hwee Hua said yesterday.
The perceived tardiness by major financial institutions in coming clean over their sub-prime exposure has led to unhappiness among investors and stakeholders, she noted. Revelations on how a rogue trader at SocGen racked up nearly US$7 billion of losses also raised questions over the robustness of internal controls, board supervision and oversight of risks.
‘Inadvertently, with financial crises of such magnitude, there will be renewed calls to strengthen and tighten corporate governance practices,’ Mrs Lim said. She was speaking last night at the Singapore Corporate Awards.
The US Securities and Exchange Commission (SEC) is now looking at tightening disclosure practices, particularly in strengthening the relationship between a company’s risk officers, the disclosure committee and the audit committee.
Singapore is not immune to financial scandals either, she added, pointing to the commercial fraud by an ex-finance manager of Asia Pacific Breweries and the allegedly unauthorised foreign exchange trading at SembCorp Marine.
As part of its continuing efforts to improve corporate governance practices among companies, the Ministry of Finance has convened an 11-member strong Steering Committee to review the Companies Act.
The Steering Committee is chaired by the Solicitor General, Professor Walter Woon, and the aim of the review is to retain an efficient and transparent corporate regulatory framework that supports Singapore’s growth as a global hub for both businesses and investors.
The committee will update the law to keep pace with relevant international legal developments and technological advances, promote greater accountability and transparency while keeping the compliance cost low.
It will be assisted by five working groups to study distinct segments of the Companies Act. The previous fundamental review of the Companies Act was done in 1999.
But Mrs Lim also noted that a robust company law framework can be an unwieldy and blunt tool and should only be used sparingly. A code of best practices will provide firms ‘the flexibility to put in place the rules and systems that are most appropriate to their context.’
To this end, the Audit Committee Guidance Committee, a joint effort of the Monetary Authority of Singapore, Accounting and Corporate Regulatory Authority and SGX, was set up to look at providing practical guidance to audit committee members.
In addition, Mrs Lim recommended the use of rewards and recognition to laud companies for adopting good corporate governance practices and going beyond best practices.
Source: Business Times 21 Feb 08