Why corporate governance becomes important now

Corporate governance — why it is needed and why it fails so often Summary Public company shareholders cannot run companies themselves, or even choose executive management. They require intermediaries in the form of non-executive directors. There are structural weaknesses in our present corporate governance rules.

Why corporate governance becomes important now

A governance code for the future economy Fri, Sep 07, - 5: In addition, a detailed set of Practice Guidance was introduced for voluntary adoption. Overall, the Code has been streamlined by reducing three principles and 31 provisions.

The result is an page revised Code including the cover compared to 33 pages of the previous version. The key revisions sentifi. Among the reforms, probably the most important relates to strengthening board composition in terms of diversity and independence.

According to Susan Neiman, the most important distinction in the world is the difference between what is and what ought to be. Recognizing that distinction is central to the process of growing up. (Why Grow Up?: Subversive Thoughts for an Infantile Age) You need not be Peter Pan to feel uneasy about. Having and implementing corporate governance best practices is extremely important; it can be the difference between a company with a bright future that generates positive returns for its shareholders, lenders, employees, and community – and an Enron. decision-making level, corporate governance injects transparency and accountability, so governance standards, corruption becomes the exception rather than the rule. corruption. Corporate Governance, corporate governance.

One would expect that with all the advocacy around women on boards, board diversity would naturally get strengthened. Well, it has, in a sense. There is a provision that requires that companies have and disclose a board diversity policy and report on progress against its objectives.

Board and director independence have been even more strengthened. More so is the enhancement of the nine-year rule. Comethe continued classification of directors as being independent after nine years on the board, must be approved via a unique two-tier voting process.

This is also enshrined in the Listing Rules. But besides coming to grips with the specific changes, it is equally important to understand why the revised corporate governance framework matters for Singapore as it transits to the future economy.

Why the revisions When deliberating the revisions to the Code, the Corporate Governance Council went back to the drawing board. The changes it eventually recommended were based on the sensible assumption that a board acting independently, especially in relation to management, will be able to better uphold the interests of all stakeholders, especially the shareholders.

This is crucial as the operating environment for companies is expected to become more volatile and uncertain. To thrive, boards will inevitably be forced to take on more risks.

They will have to manoeuvre through the economy adroitly and make tough calls. In such circumstances, effective corporate governance becomes an important risk moderator. On the same day that the new Code was announced, the Singapore Governance and Transparency Index was released.

The results on certain specific aspects of risk governance were mixed and, in some cases, worrying. More revealingly, only 5 per cent of listed boards set risk tolerance levels or have policies that describe the tolerances for various classes of risks.

Interestingly, only 15 per cent of companies have fully independent board-level risk committees.

Corporate governance – why it is needed and why it fails so often

Risk and governance Beyond these statistics, we have also recently seen examples of large companies like Keppel, SingPost and Hyflux being beset with the public fallout arising from their management of the reputational, structural and financial risks, even though some of the consequences may not have been directly attributable to the actions of their directors.

Now, governance and risk are two sides of the same coin. While corporate governance regulations, including the Code, often consider risk governance as a specific pillar, risk actually integrates and cuts across all areas of governance. The revisions are all about risk management in that broader sense.

They explicitly recognise that corporate decisions rest with fallible humans who serve on the boards of companies.

Corporate Governance: Internal Reporting for Board Oversight | blt

And while there is no way to fully regulate nor guarantee appropriate human behaviour, the least that can be done is to institutionally mitigate as much as possible any corporate misalignments that may arise from that behaviour.

This is the crux of the revisions. It is about encouraging companies to step on the growth accelerator and take on risks, but without losing sight of fundamental principles especially as they relate to their sustained, long-term wellbeing. To that end, we need mechanisms, much like the proverbial steering wheel and brakes, to ensure that the safety and interests of stakeholders can be synced with choices made by the decision makers.

Because beneath all the specific rules associated with the new corporate governance reforms, the most fundamental rationale is really altruistic in nature.

Why corporate governance becomes important now

Specifically, it is one that balances risk-taking with the reassurance of adequate governance.Corporate governance is the way a corporation polices itself. In short, it is a method of governing the company like a sovereign state, instating its own customs, policies and laws to its employees from the highest to the lowest levels.

Corporate governance is, in essence, about enabling organisations to achieve their goals. Controlling risk and assuring compliance are also important benefits. Having and implementing corporate governance best practices is extremely important; it can be the difference between a company with a bright future that generates positive returns for its shareholders, lenders, employees, and community – and an Enron.

Good governance is at the heart of any successful business. It is essential for a company or organisation to achieve its objectives and drive improvement, as well as maintain legal and ethical standing in the eyes of shareholders, regulators and the wider community.

In such circumstances, effective corporate governance becomes an important risk moderator. On the same day that the new Code was announced, the Singapore Governance and Transparency Index was released. Jan 15,  · Similarly, corporate governance structures and processes, and operational needs and priorities, are specific to a firm at a point in time.

The oversight responsibilities of boards of directors constitute an important check and balance in an organization’s ongoing governance structure and operational control system, and such a control system Author: H.

Stephen Grace Jr.

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