In this video episode of Singapore Budget 2025 Insights by KPMG in Singapore, Toh Jia Le, Director of Corporate Tax Consulting spoke to Pauline Koh, Partner, Tax Governance and IGH & Manufacturing, Tax, and Tea Wei Li, Partner, Risk, Advisory, to discuss what Singapore can do to nurture boards to be agile in an evolving business landscape and to look at how they can also boost their corporate governance.
Read video transcript below.
Our budget proposal this year focuses on the need for boards to strengthen their governance approach. Why is this important, and how would this help Singapore to be more competitive?
Tea Wei Li: Strengthening governance approaches is crucial for Singapore to stay competitive amid global and local challenges.
In today's environment, boardroom conversations have evolved to geopolitics, sustainability, and evolving technologies like AI. Now, boards must play a proactive role in addressing these issues and ensuring their strategies adapt to the changing environment.
One of our suggestions for enhancing the governance approach is to look at succession planning. Singapore has an aging population, and likewise, at the boardroom level, leadership is also aging. With increasing pressure to innovate, boards must prepare for smooth transitions to ensure we preserve institutional knowledge while catching up with the evolving business environment.
By strengthening this area, we believe Singapore can continue to solidify its reputation as a hub in terms of its forward-thinking leadership and simultaneously attract global investments.
This year's proposal outlines several areas where corporate governance can be improved, including incentivising companies to adopt leading governance practices and empowering company directors with the skills needed to navigate ESG and design innovative strategies. Can you elaborate on how greater Government backing and regulatory changes could help achieve this?
Pauline Koh: All of us reckon that as time passes, any Government policies (including any regulatory backing) have come a long way in shaping behaviours. This includes incentivising companies and empowering directors to adopt leading governance practices.
Having in place financial incentives will encourage businesses to be more transparent, voluntarily disclose information, and adopt best-in-class governance practices. By recognising these efforts through awards or platforms, companies with strong governance records may also gain tangible benefits such as bank rebates or connections to partners and customers. This approach will help attract global firms with proven governance excellence and position Singapore as a premier destination for high quality listing.
Additionally, as part of this journey, empowering company directors is equally key. Programmes like the Directorship Accreditation Programme can help directors navigate ESG complexities and innovate sustainably. To ensure a broad impact, such resources should not just be made accessible to SGX-listed companies, but also to family businesses, startups, and subsidiaries in general. With Government support, I believe that these efforts will raise the professional standards of directors across sectors, enabling them to address current challenges and drive long-term value for their companies and society as a whole.
How could enhanced tax governance practices at the board level work in practice, and how would this approach benefit companies and the public’s perception of them?
Pauline Koh: Many companies, especially SGX-listed ones, are familiar with corporate governance but tax governance unfortunately takes a backseat as it is often viewed as a downstream tax-compliance requirement.
By embedding tax governance into the broader governance agenda, boards take responsibility and a very proactive approach towards tax transparency and compliance. This reduces financial risks and signals accountability to stakeholders. This is especially crucial in the current climate – which is a complex global tax environment, particularly for companies leveraging on Government support, including tax incentives.
When companies take up good governance practice, this assures the public that they are contributing their fair share of taxes while maintaining ethical practices.
I believe that companies benefiting from tax incentives or grants should consider aligning with frameworks that are launched by the authorities such as the Tax Governance Framework (TGF) or the Tax Risk Management and Control Framework (CTRM). These frameworks help to ensure board-level oversight of tax strategies with clean protocols to proactively manage tax risk and ensure compliance downstream. As a whole, adopting good governance tax practices builds credibility, and stakeholder confidence, and enhances trust in the corporate sector and with the general public.
In the long-term, this approach will position Singapore as a global leader in ethical business practices while creating a governance structure that benefit companies, the Government and society.
What are the key advantages of conducting independent board evaluations, and what steps should Singapore take to effectively implement this practice?
Tea Wei Li: Independent board evaluations bring significant benefits to both the companies and stakeholders when done formally and rigorously. These evaluations ensure that there is fairness, transparency, and accountability in the process. It also takes away the biases or potential conflicts of interest.
In Singapore, adopting a similar approach in terms of mandating formal evaluations could elevate Singapore's position in corporate governance. Unlike in other countries where it’s already a mandated requirement, Singapore’s code operates on a ‘comply or explain’ basis. With this, we hope that it offers stakeholders an additional element of confidence, ensuring that boards are held accountable and operate at their best when it comes to prioritising corporate needs.
Preparing younger talent to shadow apprentice boards is seen in the charity sector in Singapore, but not in the corporate sector. How would such programmes work in the corporate sector, and why are they beneficial in terms of nurturing skills and agility?
Tea Wei Li: When it comes to the average age of the board of directors in Singapore, they are about in their 60s, the youngest in their 40s and the oldest in their 70s. Therefore, when it comes to introducing younger professionals into the boardroom, it is always a challenge, even for the board of directors themselves. Earlier on, I mentioned the whole idea of succession planning - by introducing a board-shadowing or apprenticeship programme, we hope that it can bring a different light to corporate culture. In the past, there was a programme focused on the development of board of directors, however, this was not widely adopted across all corporates and was instead sporadic, limited to certain companies.
By having a formalised programme with potential support from the Government to facilitate it, we hope that it will bring a different spin to the process, introducing new members to the board rather than in the context of Singapore – when hearing that boards of directors are often viewed as ‘old boys' clubs' or ‘old-school clubs’ point of view. We hope that this can help to integrate talent strategy discussions more effectively. As I mentioned earlier, board discussions have evolved tremendously over the years. We are now talking about AI and evolving technologies. All of these involve conversation that, while promoting the retention of institutional knowledge, we also aim to ensure that directors are well-equipped with knowledge on newer topics involved to effectively navigate the challenging business environment moving forward.
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