|Good corporate governance is good for the company, with a well-governed company better placed to perform over the longer-term. The Code should not be seen as burdensome but should help companies by giving clear direction on good Board and Management practices that will help build investor and stakeholder confidence. For this outcome, a culture of substantive compliance, rather than a checklist approach, is crucial. A sustainably successful company is good for myriad stakeholders: employees, suppliers, customers, shareholders, as well as society at large.|
This paragraph highlights the importance of a long-term focus, and how good corporate governance contributes to the sustainability of the company.
It harks back to the dual role of the Code spelt out in paragraph 3 of the Introduction: conformance and performance, and how performance very much underpins governance.
While the Code is seen by some as being merely about conformance and a burden to companies, this paragraph stresses that it should instead be seen as providing the necessary guidelines for good board and management practices that will help the company meet stakeholder expectations. Therefore, a proactive approach to understanding and meeting the substance of the Principles and Provisions of the Code will benefit the company.
The emphasis on addressing the needs of stakeholders and not just shareholders reflects today’s business environment and the increasing influence of the sustainability movement. Companies do not exist in isolation; rather, they operate in an ecosystem with a diverse range of stakeholders, many of whom are becoming more knowledgeable, aware, and demanding of their rights and interests. These stakeholders who include shareholders, regulators, employees, suppliers, customers and the community should not be ignored.
By understanding and addressing relevant stakeholders’ interests and needs, the company is better able to perform sustainably for the long term.
The importance of this is emphasised in Principle 13 of the Code, which states that companies are to consider and balance the needs and interests of their material stakeholders. The focus is centred on the company’s relationships with material stakeholders. This is complemented by SGX’s sustainability reporting requirements, which take a different approach, requiring companies to issue a sustainability report describing its sustainability practices with reference to – (1) material environmental, social and governance (ESG) factors; (2) policies, practice and performance; (3) targets; (4) sustainability reporting framework; and (5) a board statement. Together, these requirements encourage companies to provide a complete picture of how they seek to engage their key stakeholders and achieve sustainable long-term growth.
B. Related Rules and Regulations
- MR 711A and CR 711A: Sustainability Report.
- MR 711B and CR 711B: Sustainability Report.
- MR Practice Note 7.6 and CR Practice Note 7F: Sustainability Reporting Guide.
C. CG Guides
- Board Guide 1.1: Introduction [Corporate Governance]
- Board Guide 1.2: Company Performance [Corporate Governance]
- Board Guide Appendix 1I “Comply or Explain” – An Explanation of the Regime [Corporate Governance].
- Board Guide 4.10 Corporate Social Responsibility and Sustainability [Board Duties]
- Board Risk Committee Guide 5.11: Sustainability Reporting [Sources of BRC Assurance]
D. Related Articles
- “Shareholders vs stakeholders: For whose benefits” by K. Sadashiv. (393KB)
- “Engaging stakeholders, creating impact” by Seah Kian Peng. (326KB)
- “For whom shall boards govern” by Lawrence Loh. (373KB)
- “Impact of sustainability trends on business” by K Sadashiv. (368KB)
- “How can we do business when nature is no longer free and unlimited?” by Constant Van Aerschot. (256KB)
- “What’s the big deal about sustainability” by Lawrence Loh. (144KB)