The Singapore corporate governance code, like those in most Asian countries, is based on

the model of the Cadbury ‘comply-or-explain’ approach, and calls for independent directors, audit
committees, director training, and so on. This means companies must comply with the principles
and guidelines contained in the Code, or explain the non-compliance. Unlike in Malaysia, the Code
has shift from ‘comply or explain’ to apply or explain an alternative, which known as the
Comprehend, Apply and Report approach (CARE). In addition to the Singapore Code of Corporate
Governance 2012, the Monetary Authority of Singapore has issued a Guidelines on Corporate
Governance that relevant to all financial holding companies, banks, direct insurers, reinsurers and
captive insurers, which are incorporated in Singapore, to take into consideration the unique
characteristics of the business of banking and insurance, given the diverse and complex risks
undertaken by these financial institution and their responsibilities to depositors and policyholders.
Under the board composition category, independent directors should making up at least 30% of
the Board in Singapore which different from Malaysia that the Board should comprise at least 50%
of independent directors. In addition, the positions of Chairman and CEO should held by different
individuals in Malaysia. Unlike in Singapore, both positions are allowed to be held by same person
if the conditions of the Board comprising at least half of independent directors and an independent
director is appoint to be the lead independent director are met. Singapore does not stipulate the
Board of large companies to have at least 30% women directors that applied in Malaysia.
Furthermore, based on date for all SGX-listed entities as of September 2017, almost 30% of
independent directors in Singapore serve more than nine years, of whom some have served for
more than 30 or 40 years, even though there is a requirement stated that any Independent Directors
should be subject to a “particularly rigorous review” (“nine-year rule). Thus, the corporate
governance council of Singapore should incorporate the “nine-year rule” as a hard limit on such
directors who serve more than nine years can no longer be considered as independent. But this
similar requirement was not new for Singapore-incorporated banks and insurers as it has strictly
set in the Corporate Governance for Banking and Insurance Regulations. Plus, Singaporean
companies should also conduct an annual vote for the appointment of independent directors who
have served beyond nine years to be approved by: (i) the majority of all shareholders; and (ii) the
majority of non-controlling shareholders; for example, in Malaysia, a two-tier voting process is
subjected to such independent directors in order to seek approval from large shareholders, and
shareholders other than large shareholders. In short, Singapore shall improve their independency
and gender diversity of the Board, for example, to include a specific level of women directors in
the Board to ensure that women candidates are sought in its recruitment exercise for board and
senior management practice, to enable the discussion of the same ideas in differing ways, and
equips the company to face challenges in an ever-changing environment. Increase the number of
independent directors could bring more effective oversight of management as the board
composition should support object and independent deliberation, review and decision making.
Moreover, when ‘comply or explain’ was properly implemented, it provides a sound basis for
communication between a company and its stakeholders about its corporate governance practices.
Thus, companies and stakeholders should working together to make ‘comply or explain’ more
effective.