8th Annual Corporate Governance Summit
Session I: Forum (March 19, ’13 @ 9.15am) “Is self-regulation in corporate governance achievable? NOTES 1. Regulating behaviour v self-governance (i) I am against over-regulation I am against complete self-governance I am for self-regulation within the confines of a well thought-out framework, where BoDs must be given the responsibility to act responsibly within the reformed system of CG, where-on the board will rely on AC, NC & RC, including RC (if needed), to oversee the effective implementation of its role in a pro-active manner (ii) I sense there is over-regulation. SC & Bursa shouldn’t be telling BoDs specifically what to do – only what’s expected & the broad ground-rules circumscribing the framework, within which the BoD would operate. But we are now told we need more rules to remain relevant. The Securities Commission’s Governance Blueprint’11 contains 35 new recommendations “to move from the normative tendency which regards corporate governance as a matter of compliance with rules, to one that more fittingly captures the essence of good governance,…” The Chairman of SC further emphasised that the Blueprint “outlines strategic initiatives aimed at strengthening self and market discipline;” yet its recommendation introduces more rules in the name of intending “to reinforce self and market disciplinary mechanisms.” It’s quite clear what we need is time to build our own corporate culture. It’s also strange SC doesn’t practise what it preaches – away from normative rules to greater reliance on self regulation within a well thought-out, re-calibrated overall framework. The essence of good CG involves a state of mind. Human behaviour is unpredictable. No one size fits all. Just can’t legislate good morals. Frankly, we don’t need more rules. Just more time to build our own corporate culture. (iii) (1) SC & Bursa tend to run our corporate lives – hams us in. E.g: To be a REIT manager, the form filing is excruciating painful; makes no difference between regular fund manager and a REIT manager. Too much info. requested: One size don’t fit all. (2) Why is 9-year rule for ID even necessary? ) (3) Why dictate & set #5 plcs an ID can sit? ) Let BoDs (4) Why a quota for female directors? Etc. ) decide
2. Effective BoDs The new rules require BoDs to report annually its effectiveness & independence of their directors. The NC & RC will do this (with expertise if needed). Don’t need more rules to tell us what to do. Good BoDs and its NC & RC should know what to do and how to do it. Two developments have evolved: (i) Emergence of professional independent directors (Indies); and (ii) Take-overs & mergers change the landscape of plc management. They are not taken into account in the static CG rules. 3. Independent directors (Indies) (i) The SC is right in saying independence is “inherently situational and is, more than anything, a state of mind.” In this regard, the existing 7 criteria for Indies still makes sense: “…needs to be independent of management and free from any business & other relationship which could interfere with the exercise of independent judgement or the ability to act in the best interests of the company.” Ultimately, the qualitative evaluation is made by the collective board. The Listing Requirements advise that “boards have to give effect to the spirit, intention & purpose of the independence definition.” In the end judgement rules the day, as it should be. The Blueprint states from its survey that in 2009, only 37.3% of companies had Indies whose tenure on the board exceeded 9 years and concluded: “Long stretches of service may prejudice a director’s ability to act independently and in the best interest of the company.” This is only an impression not backed by empirical evidence. In any case, the finding is not alarming. It cuts both ways. It then refers to other jurisdictions’ tenure limits (9 years on average). “Given the potential adverse effects of tenure on...
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