Opening Address by Guest of Honour, Mr. Liang EngHwa, Government Parliamentary Committee for Finance and Trade & Industry, MP for Holland-Bukit Timah GRC at opening ceremony of 5th Singapore Corporate Governance Week

Date: October 27, 2014

Mr JY Pillay, Chairman, Council of Presidential Advisers & Rector, College of Alice & Peter Tan, National University of Singapore

Mrs Lim Hwee Hua, Chairman SIAS

Mr David Gerald, President & CEO, SIAS

Distinguished guests, ladies and gentlemen

First and foremost, my warmest congratulations to SIAS for achieving yet another milestone in organizing the 5th Singapore Corporate Governance Week and celebrating your 15th Anniversary this year.

Organized from an investors’ perspective, today’s Global Corporate Governance Conference, brings together the various stakeholders in the corporate governance ecosystem, all with the single minded focus of further strengthening corporate governance standards in Singapore.

Reading the Business Times of last few weeks, I am heartened to read many strong statements of support for corporate governance from CEOs of listed companies and I note that 116(as of 17 Oct) companies have readily pledged their support to up hold good corporate governance practices. This should be comforting to investors. I would encourage all companies to come forward to join this important initiative.

The Singapore Corporate Governance Code first came into effect in 2003, following the Asian Financial Crisis, and was revised in 2005 and more recently in 2012. The Code has largely been responsible for driving the corporate governance culture in Singapore.

The latest revisions of the code in 2012, which is now seen as being comprehensive, and aimed at addressing the mistakes that triggered the Global Financial Crisis, has led to the creation of a new chapter on risk management within the Code as well as the inclusion for guidelines for companies to promote investor rights and communication with shareholders. Singapore is not alone in these reforms and many of the jurisdictions have also improved their codes on corporate governance. But more still that needs to be done.

In the latest Asian Corporate Governance Association’s research, CG Watch 2014, Singapore was declared joint 1st with Hong Kong, representing the best in corporate governance in Asia. Nevertheless, the latest score for Singapore represents a 5% fall from the last survey in 2012. Let me share some areas of the findings that listed companies in Singapore can act on:

1.	Speed of financial reporting – While it is recognized that Singapore, as compared with Hong Kong, has a higher standard for the disclosure of audited financial statements within 60 days – the region’s best practice, the report found that 65% of large cap companies reported in less than 60 days. But ACGA’s selective review of midcaps produced a different result with only 3 out of 10 disclosing the audited financial statements within 60 days. This remains an area of concern as more than 80% of Singapore listed companies are SMEs.
2.	Sustainability reporting – while sustainability reporting is on a voluntary basis,however, the revised Corporate Governance Code of 2012 has broadened the responsibility of the company boards to include sustainability and ethical standards. The report observed that in the review of the large caps only 4 out of 10 had a high standard of sustainability reporting following the Global Reporting Initiative (GRI) with 3 reports with sustainability assurance. As more asset managers are now using sustainability as a criteria for investing, more companies should proactively adopt sustainability reporting to attract more capital.
3.	Disclosure of material information – the report highlighted that there was general consensus view among investors, analysts and fund managers, that disclosure of price sensitive information standards in Singapore was lower than that of Hong Kong. This is despite the fact that SGX has increased its queries to companies, from 333 in FY12 to 405 in FY13, about continuous disclosure.

Notwithstanding Singapore and Hong Kong being leaders in Asia, there is still a gap with world standards, with Australia scoring above both cities. There is, therefore, still room for improvement.

The level of reporting quality across all Singapore companies can also be improved. With business being more complicated these days and the growing importance of non-financial information reporting being demanded by all stakeholders, companies need to reinvent themselves and make corporate governance as part of the overall organisation’s DNA rather than something externally imposed.

While Singapore may not be leading in sustainability reporting, we can certainly take steps to improve how listed companies communicate sustainability. While, sustainability reporting is currently voluntary, regulators are already calling for feedback on whether it should impose “comply or explain” standards.

A recent study by PwC released in September 2014, on the Integrated Reporting <IR> show that some companies here in Singapore are already incorporating aspects of IR into their annual report. This is encouraging.

This report, the first of its kind for Singapore, on the STI component stocks, that looks at aspects of the IR framework, like disclosure about strategy, business models and risk. One of the key findings is that, while there is lots of disclosure, there is a lack of linkage between the information provided. It also highlighted that most companies still tend to have a compliance mindset, such as disclosing boilerplate information to be in line with the requirements or their peers. Historical reporting remains the focus, with many companies still reluctant to have a more extensive discussion on what the future may hold for them.

While this is a good first step, the understanding and case for IR needs to be better articulated for more companies to adopt the framework. According to the International Integrated Reporting Council (IIRC), an integrated report is a concise communication about how an organization”s strategy, governance, performance and prospects, in the context of its external environment, lead to the creation of value in the short, medium and long term.

Today, how business drive value has changed. Market capitalization is now increasingly determined by intangible values. A recent PwC CEO survey also highlighted that business leaders, today, recognize the need to consider and report on wider business issues. 74% of CEOs surveyed responded that measuring and reporting the total impact of their company’s activities across social, environmental, fiscal and economic dimensions contributes to long term success.

The investing community is one of the strong advocates for IR. Investment professionals relay on company reports, strategy business model, risk and performance metrics as they are all important to their analysis as are the wider market factors, relationships and dependencies.

Retail investors too are seeking more information. SIAS, in a 2011 study with ACCA, on the Value of Audit, highlighted that 85% of respondents felt that the provision of non-financial information (such as corporate governance practices and corporate social responsibility issues) would serve their investment decisions.

Current reporting frameworks do not support the communication of such wide-ranging information, nor link the different elements – from strategy to performance measures. Most of the reporting remains focused on historic, financial performance with information on other topics presented in silos.

The benefits of IR cannot be denied. A Blacksun and IIRC report on the benefits of IR can be summarised as follows:

1.	91% of all respondents have seen a positive impact on external engagement with stakeholders, including investors.
2.	Of those that have published at least one integrated report, 87% of businesses believe investors better understand their strategy.
3.	79% of respondents reporting improvements in decision making,
4.	68% reporting a better understanding of risks and opportunities, and
5.	78% seeing better collaborative thinking by the board about goals and targets.

Moreover, studies by Harvard Business School have also shown that there is a strong correlation between companies that communicate IR and long term investors.

Companies and boards need to see the value of IR and the benefits it brings, not only to the company, but for the wider capital markets. Investors would soon be demanding IR.

I trust this discussion will start today at the Conference. I call on SIAS to educate the public on the importance of IR and work with company boards to help implement IR. One suggestion SIAS may want to consider is incorporating IR in your criteria for determining the winners for the annual Singapore Corporate Governance Award.

I applaud SIAS for putting together this Conference for professionals, listed companies and investors to discuss best practices in corporate governance and for helping to improve the corporate governance standards in Singapore. Through updates and sharing information on best practices, corporate governance standards here can only improve.

I wish you all an enjoyable Conference.

Thank you.