| The emphasis of the Code is for companies to provide thoughtful and meaningful explanations around their practices, and for investors to carefully consider these discussions as part of their engagements with companies. Frank and informed dialogue between companies and their shareholders is a central tenet of good corporate governance, and encourages more active stewardship. Better engagement between these parties will benefit the company and investors. |
A. Explanation
This Introduction paragraph explains how the recalibration of disclosures in the “comply or explain” regime in the 2018 Code enhances communication between companies and their investors.
A key objective of the 2018 Code is to encourage more thoughtful and meaningful application of key tenets of good corporate governance, so that companies move away from a box-ticking mindset and reliance on boilerplate disclosures which do not provide meaningful information.
The various measures to achieve this objective are described in “Comply or Explain” paragraphs 6 to 8 and their accompanying explanations. In essence, they include:
- Redrafting and restructuring the Code and the conformance hierarchy of Listing Rules, Code Principles and Provisions, and Practice Guidance.
- The requirement for mandatory compliance with Principles.
- The requirement for full disclosure of variations from Provisions, accompanied by adequate explanations for such variations.
These measures are designed to help stakeholders understand the company’s take on governance, which, in turn, encourages their further engagement with the Board.
Shareholders, too, benefit from good corporate governance and they must share some responsibility for the company’s governance beyond just receiving reports and making self-interested investment decisions. They can help companies improve their governance standards by analysing the level of compliance and raising relevant questions at the AGM and other appropriate forums. Institutional investors, in particular, have the means to more actively and substantively engage companies about their practices.
Principle 12 of the Code describes in more detail how the company needs to communicate regularly with its shareholders, facilitate the participation of shareholders, and obtain their views.
B. Related Rules and Regulations
C. CG Guides
- Board Guide 1.6: The “Comply or Explain” Regime [Corporate Governance]
- Board Guide Appendix 1I: “Comply or Explain” – An Explanation of the Regime [Corporate Governance].
- Board Guide Appendix 1J: “Comply or Explain” – Examples of Non-Compliance [Corporate Governance]
- Board Guide 7.2 Shareholders [Stakeholder Engagement]
D. Related Articles
- “Unboxing Corporate Governance: Three Fabled Tests for a Better Code” by Lawrence Loh. (135KB)
- “Comply or Explain 2.0: What’s the Difference?” by Ng Siew Quan. (145KB)