Good governance is for all firms (except for Temasek, GIC and town councils): Pillay

CATEGORY: Double Standards

This advice applies only to businesses owned and operated by non-elites. Temasek Holdings, GIC, their subsidiaries and town councils are exempt from any form of governance.


Business Times - 20 Mar 2010
Good governance is for all firms: Pillay
SMEs should start the process even before they seek a public listing
By LYNETTE KHOO
(Singapore)
SMALL and medium-size enterprises (SMEs) should start the process of good governance early even before they are listed, says SGX chairman JY Pillay.
This will give them the opportunity to adapt and evolve best practices to suit their business needs, instead of having inappropriate cookie-cutter practices thrust upon them.
'Whatever the circumstance, governance is pertinent to every enterprise, whether new, growing or stable, or even contracting,' Mr Pillay said. 'Governance applies to the entire spectrum of companies, listed or not.'
He was the speaker at the Singapore Chinese Chamber of Commerce & Industry's Distinguished Speakers Lecture Series yesterday, addressing some 200 professionals and entrepreneurs.
While capital-raising via initial public offering or secondary fund-raising is a distinct financing option for SMEs, Mr Pillay stressed that capital markets should not be regarded as a 'no-strings attached piggy bank' and urged SMEs to use the Code of Corporate Governance as a guide, practise it within the company before seeking a listing.
Listings on Catalist - which caters to fast-growing companies - and its predecessor Sesdaq raised $751 million from 2005 to 2009. 'In return for access to primary and secondary fund-raising, listed companies are required to adopt prudent business practices to fulfil their accountability to shareholders,' said Mr Pillay.
These practices include the appointment of independent directors, sound remuneration practices, robust internal controls, and effective shareholder communication but he admitted that 'these are areas where SMEs may experience some discomfort'. For one, SMEs may not always have the resources to grasp the finer details of corporate governance. While they are not bogged down by layers of bureaucracy, the strong leadership of their founders may dominate the board and management.
'Those forceful leaders must learn how to blend that edge with appropriate governance practices that, among other requirements, obliges them to institute checks and balances,' Mr Pillay said. He noted that the SCCCI could play a crucial role in instilling good corporate governance among its members.
In response, SCCCI chairman of research and public committee Seow Choke Meng said that this was a wake-up call for the chamber, which has the largest membership of SMEs here. About 75 per cent of its 4,000 corporate members are SMEs.
'The chamber is in full agreement and will certainly look at how we can help our SME members to acquire (governance) practices,' Mr Seow, who is also SPH executive vice-president of administration division, Times Properties cum Cultural Industry Promotion, and Chinese newspapers division, told reporters. SCCCI could work with the Singapore Institute of Directors (SID) or academic institutions to provide programmes for its members.
On that note, the SID has tied up with the Singapore Management University to offer professional training and certification for directors, with its first batch of participants to graduate this month. SID can also assist in identifying suitable independent directors, a resource that is available to SMEs.