Date: September 28, 2016
Mr Gerard Ee, Chairman, Charity Council
Mr Low Puk Yeong, Commissioner of Charities
Distinguished Speakers, Panelists, Guests
Ladies and Gentleman
Good morning and welcome to the 3rd Charity Governance Conference. We are indeed honoured and humbled to be able to organise this year’s Conference, with the support of the Charities Council, as part of our Singapore Corporate Governance Week activities.
Why is SIAS, an investor body and an IPC, championing corporate governance as an important objective?
After the CLOB crisis, that saw the formation of SIAS in 1999, investors were in need of investor education and also needed better protection for their investments in listed companies. Companies were also in need of improving best practices in governance and transparency. That is when we put in place market initiatives to strengthen corporate governance and transparency. You would recall, that the Asian Financial Crisis was the result of failures of governance practices in companies.in Asia. We also saw the need to protect the investments of our citizens in listed companies. It is with the investors in mind that SIAS continues to promote good corporate governance practices and standards through various initiatives.
For the market, high standards of corporate governance facilitate investment and growth through a level of transparency and, thus, create confidence in the market. For the company, pursuing high corporate governance standards facilitate capital raising, and reduces the cost of capital. For the investors, they enjoy safety, higher valuations and better liquidity of the shares of the companies they are invested in. Therefore, it is with this in mind that SIAS continues to push for greater standards in corporate governance practices.
Why is governance important to charities?
For charities, it is important to have a strong regulatory governance structure. This is because, unlike shareholders in a listed company, the general public, whilst they are strong and enthusiastic in supporting a cause of a charity, they are not necessarily in a position to analyse its finances, balance sheet, or governance practices and board of trustees, nor are they interested. So there is a need to have a robust source of accountability. In this case, the regulator plays a much larger role.
Another point is that, often charities want to be democratic and inclusive. They want to involve people who are enthusiastic and well meaning. But often, that does not mean you have people who have the skills, and expertise to necessarily to be on the board of trustees of a charity. Hence, sometimes you could create a situation where you may have ineffective governance. The board must be able to hold management accountable and ask the right questions. Otherwise, management will be left to run without proper accountability.
Therefore, governance in charities should be even more strictly supervised, than listed companies, as donors don’t seek nor do they get accountability. I am of the view, that there needs to be stronger regulation, better education for the board of trustees, and a more rigorous nomination and appointment process. It is not just about those who have time and are enthusiastic, but those who have the necessary qualifications. Perhaps, we should create a situation where qualified corporate directors cross over to the charity boards. Charities could also have professionals join the Board to manage and guide the charities. Possibly, to increase the effectiveness of governance in charities, in some countries the regulators have begun board evaluation process and even conduct spot checks.
While these requirements may be seen as external measures, having governance as part of the DNA of a charity, rather than an after-thought, will go a long way in improving the governance practices. For example, having a whistle blowing policy and a process to manage it would go a very long way to improving the governance practices of charities.
How does SIAS practices good governance as a Charity
a) External Audit
When I first started SIAS, as a non-profit organisation registered under the Registry of Societies, we didn’t have to have yearly audits. But as a matter of good governance practice, we appointed external auditors to audit the accounts from the very first year.
Many smaller organisations and charities would deem this as an added expense, but I saw this as something necessary to create trust and help improve our accountability to our stakeholders. The external audit helped to provide assurance to SIAS members, sponsors, donors and the public, and the AGM process provides accountability to all stakeholders.
b) Internal Controls
In addition, the Management Committee has always managed high levels of internal controls. For instance, up until recently, every dollar and cheque payment required a minimum of 2 signatures. We have also in place a procurement policy reviewed by the Audit Committee.
c) Oversight
As check and balance for the President and Management Committee, the constitution was also amended to allow for a Chairman to be nominated by the Management Committee. The independent Chairman is to ensure that the President and Management Committee act in the interest of the Association.
d) Independent Committees
We have also set up Audit, Nomination and Remuneration committees. Both the Audit and Nomination committees are made up of majority independent volunteers who are also not on the Management Committee to ensure independence.
My experience in South Korea
Like listed companies, I do appreciate that the culture and the tone at the top in charities varies. As ethics, whether in financial institutions, listed corporations or charities relates to trust. The public would always expect charities to be trust worthy. Let me share with you an experience which has made me think.
Having heard much of Pastor Cho Yonggi of South Korea, and his enormous Church, my wife and I, out of curiosity visited the Church to see the much talked about sanctuary. Having been taken around by the Pastor on duty, we decided to make a small donation to the Church and handed it over to the Pastor on duty. Upon receipt of the donation, the Pastor asked us to wait, and promptly and unexpectedly, brought a receipt for the small amount of the donation. We were surprised, as we have not experienced this in Singapore. This small act of acknowledgement, gave us an idea of the level of accountability and governance in that Church.
I trust you will find the discussions at this conference interesting and useful. I wish you all an enjoyable day.
