PUBLIC LISTED COMPANIES

PUBLIC LISTED COMPANIES:

(Powers of financial officers): 18.

Mr Chiam See Tong asked the Senior Minister whether the Government has any plans to promote greater confidence in our market by introducing greater internal controls in public listed companies to check the powers of financial officers to single-handedly make big payments over a period of years, causing huge losses to their companies.

Mr Tharman Shanmugaratnam (for the Senior Minister): Mr Speaker, Sir, Mr Chiam has asked if the Government intends to introduce more rules governing internal controls in public listed companies.

The Companies Act sets out the minimum standards required of all companies registered in Singapore. Section 199 of the Act specifically requires a public company, whether listed or unlisted, to maintain internal accounting controls which provide reasonable assurance that assets are safeguarded against loss resulting from unauthorised use or disposition, and that transactions are properly authorised and recorded as necessary to maintain accountability of assets.
In addition to the Companies Act, the SGX Listing Manual requires listed companies in Singapore to comply with the Code of Corporate Governance, or disclose and explain any deviations. The Code places responsibility on the Board of a company to ensure that the Management maintains a sound system of

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internal controls to safeguard shareholders' investments and the company's assets. Further, the Code recommends that the audit committee - the majority of which, including the Chairman, should be independent - review the adequacy of the company's internal controls and that the Board comment on the adequacy of the internal controls in the company's annual reports.

This approach allows a listed company and its Board the flexibility to take into account the specific circumstances of its business operations when designing its system of internal controls.

Together, this combination of the Companies Act requirements and the best practice guidelines in the Code for listed companies set an appropriate framework for proper internal controls by companies in Singapore. The Monetary Authority of Singapore (MAS), the Singapore Exchange (SGX) and the Accounting and Corporate Regulatory Authority (ACRA) will continue to keep the legislation and best practice codes up-to-date through regular refinement, so that they stay relevant in a changing environment. But imposing additional or more detailed rules on companies will not prevent corporate mishaps.

We also have to go beyond compliance with minimum regulatory standards. The boards and managements of companies should look for practical ways to improve their risk management and governance practices, especially because their companies operate in an increasingly complex environment.

The Government will support industry efforts to improve corporate governance and explore practical initiatives to help companies improve their internal controls and practices. For instance, MAS, ACRA and SGX recently, in fact just a week ago,

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established an industry-led Audit Committee Guidance Committee. This Committee has been tasked with developing practical guidance to assist audit committees of listed companies to better understand their roles and responsibilities, and to enhance their effectiveness.

Mr Speaker: Mr Chiam, you have one minute left.

Mr Chiam See Tong (Potong Pasir): Sir, despite what the Minister said and the provisions in the Companies Act, in recent months, large sums of money have been lost by public companies. Should the Ministry not do something about it?

Mr Tharman Shanmugaratnam: Sir, I think the basic framework, as I mentioned, is appropriate - you have minimum regulatory requirements set out in the law which are mandatory to all companies and you have best practice standards which are from time to time refined in consultation with industry. But what matters, quite apart from the minimum regulations set out in law and best practice guidelines, is a culture of the corporate sector - to want to improve risk management practices, because they have the interest of shareholders in mind, to want to improve internal controls because it secures sustained good performance. That culture is something which is work-in-progress in Singapore as it is in other jurisdictions, and I am sure we can do better.

3.00 pm

Mr Speaker: Order. End of Question Time.

[Pursuant to Standing Order No. 22(3), Written Answer to Question No. 20 on the Order Paper is reproduced in the Appendix*. Question Nos. 19 and 21 have been postponed to the next available sitting of Parliament .]

*Cols. 303-304.