Ladies and gentlemen
1. Thank you for inviting me to this year’s Singapore Corporate Awards. It is not very usual for a Health Minister to be giving out these awards and addressing corporate leaders present.
2. My daily preoccupations over the last year have been pandemic control and the care of an ageing population, not business success or corporate governance. Perhaps it is a sign of the world we live in today, that your work and mine find resonance in each other and reflect the current zeitgeist of businesses.
3. The truth is – CEOs and Boards today need to worry about many things. You have to juggle business growth and competition, workforce safety and health, diversity, climate change, pro-family practices, inclusivity, providing work-life balance, being prepared for the next pandemic.
4. They are all important, all imperatives, all demanding your time. If it is of any help I want to say I empathise with you, because we in Government have to do the same. Indeed, there are certainly more similarities between the governance of a nation and that of a company.
5. The chief among these is our fiduciary duty. A government acts in the interest of its people; boards uphold the interests of their shareholders. There is democracy in our appointments. Respect for individual’s agency and interest is therefore at the heart of both our governance structures.
6. A democratic governance structure does not mean majoritarianism. In Singapore, we ensure minority communities are part of a just and equal society; in companies you protect the interest of minority shareholders.
7. Countries need economic growth, just as companies strive for a business growth story.
8. And there is the increasing emphasis on the less tangible but crucial aspects that are non-economic or financial in nature. For a country, it is its unity, spirit and soul, how a people come together as a society, taking care of each other, learning to exercise give and take, and taking collective responsibility to build a sustainable home. They involve a far more diverse set of objectives than GDP growth and employment rates but are crucial in defining the success of a nation.
9. In a company, similar imperatives are discussed in Boards, and they are now expressed in ESG (Environmental, Social and Governance) priorities and targets.
10. ESG may sometimes make uncomfortable demands on boards because it can potentially open up an endless set of non-economic goals and objectives, tugging you in different directions. But it reflects the complex world we live in today, and the collective concerns of our stakeholders.
The Evolution of Corporate Governance
11. How did corporate governance evolve to what it is today?
12. In the days of the East India Company or the Levant Company, the bottomline was simpler. People put their money with these Crown-sponsored chartered companies and had faith that they would get a handsome return. There was little emphasis on corporate governance. These were after all great enterprises of a brave new world, bringing wealth and glory to the empire.
13. Things changed in the decades post World War II, when peace brought about many more business opportunities into new regions, markets, industries and companies. Tariff barriers came down, Asia and especially China started to open up.
14. With a more vibrant market, investors need to be discerning between good, bad and scam projects. Best practices, rules and regulations were needed to protect investors and signal the quality of proposed investments. Corporate governance began to enter the lexicon of businesses.
15. An interesting phenomenon happened in the 1980s, when the Japanese started to emerge as a global industrial powerhouse. Kaizen – or the continuous improvement movement – was a formidable competitive advantage. The strive for quality and productivity proved to be contagious and became important company imperatives all over the world. Productivity-related metrics proliferated in boardrooms.
16. The productivity movement empowered workers to solve ground problems, and this probably ushered the beginning of the modern enterprises, where workers gained agency. In Singapore, we started a National Productivity Board, the predecessor of today’s Enterprise Singapore. I started work around that time and remember how each officer was required to submit four productivity-related suggestions every month.
17. Then came the tumultuous 1990s and 2000s, which saw a few major ebbs and troughs in the business world. There was the rise of the dotcom era when we witnessed many companies adding “dotcom” behind their names and we wondered what was the real change in the business. Capital gushed in, but like all helium-filled balloons, they deflated and came crashing down in the early 2000’s.
18. There was September 11, which ushered us into the world of heightened insecurity, a permanent change in travel experience.
19. Then came the Global Financial Crisis in 2008-2009, again a result of burst of a bubble inflated by financial engineering too clever for its own good. But the aftermath of Crisis was profound. The developed world saw a decade of income stagnation and a weakening middle class. That sowed the seed for societal fracture, a retreat from globalisation, Brexit and the Make America Great Again movement.
20. With each downturn and crash, the world sought to cushion itself against a similar tragedy or mistake in future. Rules and regulations were introduced and accumulated. Similarly, in a post COVID-19 world, companies have to devise contingency and pandemic control plans. With an uncertain geopolitical situation, companies need to be prepared for bifurcation of supply chains.
21. As Board members, CEOs and decision makers, what I have said is not new to you. But I recount this history briefly to underscore the point that ultimately, a company as an economic unit is a living and inextricable part of society and our larger world. It is subject to the challenges and contradictions in life and the human system we live in and contend with issues not related to economics or business.
22. These difficult life and societal issues will find their way to boardrooms, through government policies, international norms, regulations and laws, or investors’ expectations. They are all valid and important, with reasons grounded in real life challenges and experiences. They shape the way a company makes decisions, does things and measures success.
Simplicity, Spirit and Focus
23. How then, can a company or organisation fulfill such a wide array of demands? I will offer three suggestions. Where relevant, I will draw on our experience in managing COVID-19.
24. First, as regulators, we need to simplify rules as much as possible, without compromising standards. This may mean doing away with rules that have accumulated over the years and may have become duplicative or less relevant. It may also mean re-purposing them to be risk-focused, and easier to apply. Regulators must always be mindful that rules cannot end up impeding the proper functioning of businesses.
25. Here I have a very relevant COVID-19 experience. At the height of the Delta infection wave last year, we accumulated many COVID-19 rules – on isolating the infected, quarantining the close contacts, testing and reporting frequently. The cycle repeats if close contacts become infected.
26. Soon, it became too burdensome to bear and some people were more fearful of the rules than the virus. So the MTF decided to press a reset button, and boil it down to only three rules – what to do when infected and unwell, when infected and well, and when you are a close contact.
27. As part of the reset, we did away with quarantine of close contacts of infected individuals. Overnight we released some 40,000 people quarantined at home. It was a major relief to them as they could work and send children to schools. Most importantly, with simpler rules, people understand them and can now play their part to help manage the pandemic.
28. It was not without risk. Releasing close contacts on quarantine probably led to more infections, but we were already at the height of an infection wave, and we have redefined our objective – not to achieve zero or low infections, but to minimise incidences of severe illnesses and deaths. It was a risk worth taking and in hindsight, the correct risk to take.
29. From time to time, we need to reassess our objectives and priorities and give rules a good, decisive prune. This was done in 2018, when the Code of Corporate Governance was significantly streamlined and shortened by about half, and we should continue to do so periodically.
30. Second, for both the regulator and regulated, we need to avoid the mentality of ticking the boxes. Instead, learn to live up to the spirit of the rules, and draw a distinction between rules and principles.
31. During the pandemic, when we regulate group sizes at five, there was a minority who meet multiple groups of five people in a day. They are technically not in breach of the regulations, but the action misses the point that we are trying to minimise contact and slow down the transmission of the virus.
32. When we do not buy into the principles behind rules, the relationship between the regulator and regulated becomes one of ‘上有政策，下有对策’ – meaning the top takes policy action, the ground counters with an evasion.
33. Conversely, if we internalise the principles behind the rules, the rules can become less burdensome. We start to exercise our own judgement to fulfill our own objectives, and rules become a guide.
34. We have removed the mandatory requirement to wear masks indoors. Some of you had taken it off, others kept it on. MOH is no longer stipulating your action, we still want to control the pandemic, but is leaving individuals to make your own judgement. To be able to live up to the spirit of the policy is a capability and an enduring resilience.
35. I believe when organisations genuinely want to do their part for climate change, narrow inequalities, and be inclusive, they will inspire a generation of socially conscious young talent to join them.
36. Third, we need to remember the fundamental objective of a company, which is to be enterprising, competitive, create growth and jobs. ESG rules requires companies to achieve this responsibly but should not detract from this core objective.
37. Likewise, the purpose of risk management is not to eliminate risk, but so that a company can take appropriate risk to grow its business.
38. How our organizations go about achieving our core mission should and never be prescribed by rules. It is better to be generally in the right direction than precisely wrong. We depend far more on our people and organisations to be responsible, socially conscious and enterprising to accomplish great things.
39. Ultimately, a society needs companies to be entrepreneurial, break new grounds, and do well commercially. Only then can it provide jobs and opportunities for people. As we always say in the NTUC – ‘the best social welfare is a good job.’
40. The most important and innovative solutions to problems of humankind – like COVID-19 vaccines – are made possible because of the enterprise of commercial companies. In this sense, the interest of the company is embedded within the larger needs of nations, societies and peoples.
41. The Government is now engaged in an exercise called Forward SG, where we want to crystallise the key aspects of social compact for the next phase of nation building. In other words, we are trying to answer the question: what does Government, businesses and people have to do for each other, so that collectively we can achieve something big and important for the future of Singapore?
42. I think somewhere in the answer, lies the understanding that businesses need to do their part for society, community and environment, and Government will do whatever we can to make Singapore a good place to do business and maximise your chance of commercial success.
43. Indeed, in the aftermath of COVID-19, we can feel a new wave of business confidence in Singapore, that we are well-connected to and well-regarded by all major markets in the world; we are a safe place to invest; and we are able to accomplish complicated things – like pandemic control during a health crisis. I like to think that is why it is relevant for a health minister to be present at a corporate award ceremony.
44. It is therefore a very good juncture, for Government and businesses – the regulator and regulated – to also renew our enduring partnership.
45. Tonight, we honour companies that have demonstrated excellence in corporate governance. The winners are exemplars of upholding the spirit of good corporate governance, contribute to the larger good while delivering good business performance. The Institute of Singapore Chartered Accountants, Singapore Institute of Directors and The Business Times have been organising this annual award for many years, and we thank them for their relentless effort to promote good corporate governance.