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SINGAPORE: Small and medium-sized enterprises (SMEs) should start their corporate governance process early and the business chambers should help them, according to Singapore Exchange chairman J Y Pillay.
Mr Pillay was speaking at an event organised by the Singapore Chinese Chamber of Commerce and Industry.
SMEs often lack resources for a comprehensive corporate governance system. But Mr Pillay said if they have good governance in place, they can adapt and evolve best practices for their business needs.
He said: "Sound governance should not be perceived as an undesirable accompaniment of corporatisation and globalisation, a chore to be fulfilled for form's sake. It is a pre-requisite to continued growth and successful integration into a globalised world."
Participants at the event agreed that business chambers can help SMEs with sound governance.
Seow Choke Meng, chairman, Research & Publications Committee, Singapore Chinese Chamber of Commerce & Industry said: "It is good always to start this early. When you really list it, or establish a big company, it is all in place and it can take you on to much further heights.
"Chamber is in full agreement and Chamber will look at how we can help our SME members to acquire these practices."
Lui Seng Fatt, lead independent director, Ying Li International Real Estate said: "As an SME, if you have an aspiration to grow into a larger company, (if) you want to go beyond Singapore, (if) you want to go into the market to raise funds, I think you have to start very early on the corporate governance.
"Because every fund, every investor will ask you the same question - how well is your company's governance? And this will reflect on the prospects and how well the company will move forward."
On Thursday, regulators announced proposals to improve corporate governance at local banks and insurers.
Mr Pillay said: "It is a good first move. The process of corporate governance is an evolving one, so you will expect things to be generally tightened up from time to time ... The MAS and the people responsible for corporate governance will gradually drag, pull (and) lead the community along."
One proposal is to deem directors non-independent if they serve nine continuous years on the Board.
Mr Pillay said that is a reasonable time-frame, but believes there should be a limit on how many Boards a director sits on.
"Can be no more than five, that is my personal opinion. If you have got the time, you can work long hours, by all means. Nowadays as you all know, it is a heavy responsibility to be on a listed board and it does take up a lot of time," he said.
On what keeps Mr Pillay awake, he said he has got a good management team in place, but the key is keeping the team together.
He said: "That is the most crucial aspect. If you have got a good team, then no matter what the external environment may be, you will somehow be able to survive.
"Ultimately, the job of every organisation is to survive from day to day, from month to month and from year to year. Because without survival, there is nothing.
"There is no reason why an organisation should have an expiry date. We are human beings, we are organisms and sooner or later, we will terminate. But why should an organisation end? They do end because of problems that can be traced back to their culture and to their form of governance, almost invariably."
Speaking to reporters on the sideline of the event, Mr Pillay was asked whether the listed companies on SGX are ready for the proposed rules. He said: "Well, I hope they sit up and take notice and prepare themselves."
Mr Pillay said the code of corporate governance is but a guide. The important thing is to ensure it is being practiced within a corporation. He added that by building up a robust corporate governance culture, it would lead to better productivity growth within an organisation.
- CNA/sc
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