DPM Heng Swee Keat at the Singapore Corporate Awards 2024

Award winners,

Ladies and gentlemen,

Good evening. My heartiest congratulations to all winners of the 2024 awards. Let me also commend the Business Times, the Singapore Institute of Directors, and the Institute of Singapore Chartered Accountants for your foresight in initiating this award to promote good corporate governance in Singapore almost 20 years ago.

This evening, the allow me to address two issues which I trust are relevant and useful to all of you. First, why Governance, and corporate governance matters? Second, in the coming years, what else do we need to do, to keep companies competitive, and to evolve our corporate governance.

Why Governance Matters?

Corporate governance has been defined in various ways by organisations like the Organisation for Economic Co-operation and Development (OECD), the Chartered Governance Institute, and our own Singapore Institute of Directors (SID).

At its heart, it is the system of people, practices, and processes by which a company is directed and controlled. 

And as any organisation operates within an ecosystem, it is about how a company manages its network of relationships with its shareholders, employees, and other stakeholders. 

Governance also applies to political entities, national and global institutions, non-Governmental organisations (NGOs) and charities. Governance matters for at least two reasons. 

First, resources and decision-making power are entrusted to a smaller group of leaders, to achieve certain missions and outcomes, whether explicitly articulated or implicitly accepted. 

This recognises the value of collective action – that by pooling resources together, each member can achieve more as a collective whole, than by individual effort.

Second, the leaders entrusted with the responsibility of stewarding the resources must remain accountable. 

Depending on the context, the form of organisation and governance will differ. 

At the Global level, the Bretton Woods Agreement and the General Agreement on Tariffs and Trade (GATT) laid the foundation for international finance and global trade. This ushered in a period of prosperity and growth after World War Two. 

Today, institutions like the International Monetary Fund, World Bank and World Trade Organisation remain important in governing and promoting free trade and economic cooperation globally, although it is also being challenged. 

At the Country level, the Soviet-led command economy model competed against the US-led free market capitalist model. Deng Xiaoping’s reforms and opening up in China, demonstrated the results of market mechanisms to allocate economic resources. 

Today, we continue to have robust debates about the different ways of governing society, and different forms of capitalism, even within free market economies.

At the Corporate level, different forms of capital pooling and risk sharing have evolved from way back in the Tang and Song Dynasties in China, and later in Europe.  The creation of joint stock companies with limited liability, like the Dutch East India Company and British East India Company in the early 1600s, ushered in a new corporate form. 

These companies separated the ownership and the management of assets, which enabled entrepreneurial individuals to attract capital and grow businesses in new ways. 

Capital markets and new corporate structures have evolved, with a range of instruments and corporate structures, ranging from sole proprietorships, to limited liability partnerships, to listed companies. But the fundamental principle remains that governance and leadership is important, especially when there is potential impact on the public.

On the flipside, this separation of ownership and management also created new challenges.

Notably, the principal-agent problem arises, where the management may not necessarily act in the interest of the owners of the assets. 

This is complicated by diversified asset ownership structures, where majority and minority owners may have different interests. 

As corporates amass heft, they are also expected to use their capabilities and resources to promote social change – whether in caring for the environment, adopting more inclusive and diverse hiring practices, or fulfilling their corporate social responsibility (CSR). 

Over time, corporate governance structures in different jurisdictions have evolved in tandem with societal norms and expectations. 

For example, the structures of Boards, and the representation on them, differ in the US, Europe, and Japan. 

We have also updated our corporate governance regime in Singapore to reflect the changing expectations of companies. In 2018, MAS included guidance on stakeholder engagement in the Code of Corporate Governance. More recently, SGX Regco also introduced new rules on board diversity, tenure limits for independent directors, and sustainability reporting. 

I thank SID, ACRA, MAS and SGX Regco for your hard work in engaging our companies and stakeholders to make these changes. 

In summary, governance matters for companies, countries and public institutions. 

And for listed companies, the need to serve a diverse body of shareholders and stakeholders well, to win trust and maintain public confidence to ensure your long term success, has grown. 

What Else Do We Need To Do?

Let me now turn to the second issue – what else do we need to do?

For a start, we must continue to ensure that individual Directors possess the right competencies and skills, and that Boards are effective.

There has been much debate over the role of Boards. Are they there to ensure conformance and compliance, or do they have a more strategic role in setting long-term direction and achieving high performance?

I would argue that the answer is both.

I think of compliance as a basic hygiene factor – the baseline requirement for all companies.  

This includes ensuring transparency and accountability, and complying with local regulations including on financial reporting.

Beyond complying with the letter of the law and merely checking the boxes, it is fundamentally more important to internalise the spirit behind the rules, and the norms of accepted behaviour. 

Companies which deliver on this can expect an improvement in business outcomes, such as improved access to capital, talent, and new markets. 

But beyond compliance, I believe that boards will need to play a broader and more strategic role in the coming years. Why? Because I believe that the coming waves of changes across the global business landscape will be swifter, and more impactful. These changes include: 

Shifting attitudes towards globalisation, and greater contestation between big powers, which impact companies through tech wars, trade wars, and the reconfiguration of supply chains; 
Rapid advancements in technology, with new digital technologies like AI disrupting traditional business models, and emerging threats like cybersecurity attacks and scams;

Evolving views of the urgency of climate change, which manifest as changes in consumer preferences and accompanying policy measures like carbon pricing; and

Changing demographics, especially in more developed countries, which impact future economic competitiveness and fiscal stability, particularly as technology is reshaping jobs and the nature of work at the same time. 

The average life span of a S&P500 company in the US has fallen, from more than 60 years in the 1960s, to less than 20 years today. Rapid changes are imposing greater demands on companies, and Boards must respond.

In Singapore, I am glad that corporate governance has improved since this award was first initiated. 

The ASEAN Corporate Governance Scorecard, NUS’s Singapore Governance and Transparency Index (SGTI), and Council for Board Diversity Review have all shown improvements. 

Nonetheless, there is more that we can do to help our companies strengthen corporate governance, particularly for smaller companies with less resources. 

Let me suggest three areas where we can focus on to improve corporate governance, and prepare our companies to do better in the coming years.

First, to step-up education for Directors and Boards. 

SID’s Director Competency Model, and its related accreditation programme, outlines eight dimensions of skills which Directors should strengthen. 

There are also many training programmes available, including ISCA’s Board of Directors (BoD) Masterclass, which is available online and on-demand through its “Boardflix” platform. Directors on the boards of Trade Associations and Chambers (TACs) and charities can also enjoy a 50% discount off the BoD Masterclass Programme under ISCA’s “Do Good” initiative.

As our economic relationship with the region and the world expands, i suggest that we can go further, to make Singapore a meeting point for global and regional leaders to further best practices on corporate governance. 

I encourage SID and ISCA to build a Global-Asia network of leaders and professionals on corporate governance, in partnership with business schools like NUS, NTU, SMU and INSEAD.

Second, I believe that the coming waves of technological advances such as digitalisation, AI, biotech, robotics and others will disrupt many companies and industries. 

At the same time, it can also catapult some to leading positions regionally and globally.  

Technology will shape the future economy, so I hope to see companies in Singapore enhance your competitiveness, by investing in and leveraging on technology to transform. 

Today, technology companies make up around 30% of the market capitalisation of S&P 500 companies. And even non tech companies can leverage new solutions to optimise operations and improve productivity. 

Often, companies concerned about their return on investment and stock prices may trim investments in R&D and in building capabilities. But in this time of rapid changes, failure to invest in building capabilities for the future can mean failure in the future. It is a trade-off between the short-term pain and long-term gains.

So let me take this opportunity to encourage companies here to make the best use of the various government grants and tax-deductions for such investments and in particular to focus on technologies that can really disrupt your industry or catapult your business.

I am delighted that for the first time, we are presenting a Special Recognition Award for Transformation to Sembcorp Industries. Congratulations!  The Special Recognition Award celebrates Sembcorp’s efforts and achievements, in transforming to be ready for the future.

Sembcorp has pivoted from a traditional fossil fuel company to a leading renewable energy company, and has overhauled its portfolio and business model. 

Through its transformation, Sembcorp has also achieved annualised total shareholder returns of 36% from 2019 to 2023, showing that transformation does pay off. 

This is very much in line with our efforts to transform the 23 sectors of our economy. I thank the organisers of the Singapore Corporate Awards, and your partner Bain & Co, for your support of this national effort – and recognising that ultimately, transformation of our economy starts with each company.  

I earlier mentioned how the average lifespan of S&P 500 companies has shrunk. As competition intensifies amidst new disruptive technologies amidst the trade war and tech war, could we see more vibrant start-ups grow into globally competitive companies here? And can our listed companies grow from strength-to-strength, as Sembcorp has? 

My hope is that many more companies in Singapore, including the winners of the Awards this year and over the years, will go on to recognise the swift changes around us, and leverage technology and pivot your business model to make an even bigger impact. 

I have spoken on the effectiveness and competence of Boards, and the need to appreciate the swift changes, and to leverage technology to transform. As companies grow in resources and expertise, their impact, positive or negative, will also expand. Accordingly, the third area that I would suggest is that we will need to evolve our corporate governance code and practices, in line with expectations of the many stakeholders.

The Occupy Wallstreet protests against economic inequality and corporate greed is a grim warning of the consequences of failing to do so. 

So I hope that our ecosystem can come together to continue to evolve corporate governance in Singapore. This includes companies, industry associations like SG ListCos, SID and the Securities Investors Association Singapore (SIAS), regulators like MAS, ACRA and SGX RegCo, and our media and expert partners. 

For example, the Corporate Governance Advisory Committee (CGAC) is an industry-led body to advocate for good corporate governance practices among listed companies in Singapore. It monitors market and international developments and works closely with the regulators on recommending changes to our regime. 

Ultimately, uplifting corporate governance requires an ecosystem effort. The Government will continue to consult, and listen to feedback from industry practitioners. We welcome your constructive feedback and suggestions on how we can improve our corporate governance regime and uphold standards in a manner that suits the Singapore context.  

In particular, what norms and values will guide our action, as we enter the age of digitalisation, AI, and biotech?  

Conclusion

Let me conclude.

Governance is necessary for all organisations – including for listed companies.

Strong corporate governance improves business outcomes – by improving access to capital, talent, and new markets, and also by preparing companies to transform and stay relevant and competitive in the long run.

By working together to step up education for our Directors and boards, embrace technology and transform, and evolving our corporate governance practices, we can build an economy that meets our future needs and demands, improve the lives of our people and peoples around the world, and protect our planet.

My heartiest congratulations once again to all award winners. And a big thank you to BT, SID and ISCA for your long-standing efforts to promote corporate governance in Singapore, and enabling all of us to learn and evolve.

Thank you!