A)Company Information Wing Tai Holdings Limited (Wing Tai) was incorporated in Singapore on 9 August 1963 and listed on the Singapore Exchange on 21 February 1989. Wing Tai started in Hong Kong as a garment manufacturer in the 1950’s. It later expanded its operations to Singapore and Malaysia in the early 1960’s and entered the property market in Singapore in 1978. Since then, Wing Tai became a major property player with a niche reputation for delivering premium developments with innovative design, finishes and workmanship due to its dedicated attention to detail and quality.
Wing Tai together with its regional business entities, USI Holdings Limited (Hong Kong) and DNP Holdings Bhd (Malaysia) formed the Wing Tai Asia Group. Figure 1 shows the overview of WingTai Asia Group and the business they are in. Wing Tai is one of Singapore’s leading property developers and Lifestyle Company widely recognized for quality in its property developments. They are recognized for developing distinctive, prime, luxury homes in District 9, 10 and 11. Some of their recent projects are Draycott 8 Clubhouse, The Light @ Cairnhill, Helios Residences, The Riverine by the Park and many more.
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Other than its main business in property developments, Wing Tai has also gone into apparel retailing, hospitality management and food franchise operations. Figure 2 shows the overview of Wing Tai’s business. Wing Tai’s engages both the agency theory and stewardship theory in their management. The agency theory is engaged as the shareholders employ the Board of directors and management to manage the company. At the same time, they also believe that the managers are good stewards of the company and they work hard to achieve high level of profits and shareholders’ returns.
B)Development of Corporate Governance in Singapore After the Financial crisis in 1997, Singapore Government, mainly the Ministry of Finance (MOF), the Monetary Authority of Singapore (MAS) and the Attorney-General’s Chambers (AGC), had decided to appoint 3 committees to improve Singapore’s standard on corporate governance. The 3 committees that were setup were the corporate governance committee, the disclosure and accounting standards committee, and the company legislation and regulatory framework committee.
Their purpose was ‘to enhance the existing framework for corporate law and governance, to strengthen Singapore’s competitiveness as a world-class business and financial centre’, (Dr Richard Hu, 1999). In 18 July 1998, the Singapore Institute of Directors (SID) was formally incorporated and formally launch on 16 December 1999. The main objective of SID is to increase the professional standards of corporate directors. The Council on Corporate Disclosure and Governance (CCDG) was launched on 16 August 2002. PM Lee Hsien Loong in his speech had stated that the 3 roles of CCDG are: -To prescribe accounting standards in Singapore. To strengthen the framework on disclosure practices and reporting standards. -It will own and update the Code of Corporate Governance The first Singapore’s Code of Corporate Governance was published on 21 March 2001. Then in May 2004, CCDG setup a review committee comprising private sector participants to review and improve the Code, taking into account international developments and feedback received since the Code was introduced in 2003. In July 2005, the revised Code of Corporate Governance was released. The new code places greater emphasis on internal control and encourages greater disclosure as well as whistle blowing.
In 1 September 2007, CCDG was dissolved and its roles & responsibilities were passed on to MAS, Singapore Exchange (SGX) and Accounting Standards Council (ACS). MAS and SGX will take over the responsibilities to own and update the Code of Corporate Governance and to strengthen the framework on disclosure practices and reporting standards. The ACS that was formed on October 2007 will take over the role to prescribe accounting standards in Singapore. Figure 3 shows the timeline on the development of Corporate Governance in Singapore. C)Company Analysis
The following table (Table 1) sets out the comparison of how Wing Tai’s corporate governance has fared against the Singapore’s Code of Corporate Governance. No. Singapore’s CGComplyNon-ComplianceRemarks BOARD MATTERS 1. The Board’s Conduct of Affairs? -It is not stated in the Annual report of Wing Tai of the internal policies/guidelines/ material transaction that requires board approval. -Wing Tai did not state the orientation or the training that is required for the director(s). 2. Board Composition and Guidance? 3. Chairman and Chief Executive Officer? -Mr Cheng Wai Keung is both the CEO and the managing director of Wing Tai.
In addition, it is not stated in the Annual report that Mr Cheng Wai Keung and Mr Edmund Cheng Wai Wing are related. -Wing Tai did not state the different roles and responsibilities for the Chairman and Managing director. -Wing Tai’s board did not appoint a Lead independent director but they do have 70 % of independent directors on board. 4. Board Membership? -Wing Tai did not disclose the search and nomination process in the annual report. They only provided a brief description on the criteria required. 5. Board Performance? -Wing Tai did not provide the assessment process. 6. Access to Information?
REMUNERATION MATTERS Procedures for Developing Remuneration Policies 7. Procedures for Developing Remuneration Policies? -Wing Tai need to disclose the fee structure framework for the directors 8. Level and Mix of Remuneration? 9. Disclosure on Remuneration? – In Wing Tai’s annual report only gives an overview of the company’s key executives that earn above $250,000. They did not provide the names of the top 5 key executives. ACCOUNTABILITY AND AUDIT 10. Accountability ? 11. Audit Committee? Wing Tai does not have a whistle-blowing policy in place. 12. Internal Controls? 13. Internal Audit? 14.
Communication with Shareholders? D)Recommendations To further improve Wing Tai’s corporate governance, they should take the following recommendations: 1. Internal Guidelines and Policies As required by the code of corporate governance, Wing Tai should set out clearly in their annual reports on their internal guidelines/policies that require board approval and specify the type of material transactions that require board approval. Even if there are no material transactions required, they should have stated in the annual report like how Eu Yan Sang (EYS), FJ Benjamins (FJB), C. K. Tang (Tangs) had done. 2.
Director’s Training and Orientation Program As required by Code of Corporate Governance, it is required for Wing Tai to state in the annual report the training and the orientation program that they have prepared for the new and existing directors on board. They could follow how Singapore Telecommunications (SingTel) had reported in their annual report. 3. Chairman & Managing Director Wing Tai should appoint a different managing director or Chairman for the board to avoid any conflict of interests to ensure an appropriate balance of power, increased accountability and greater capacity of the Board for independent decision-making.
The separation of roles ensures a balance of power and authority, such that no one individual represents a considerable concentration of power. Similar family-owned businesses like EYS, and Tangs had appointed different Chairman and CEO and their companies are still profiting and doing well. 4. Lead Independent Director As the roles of the Managing director and Chairman are being held by the same person (Mr Cheng Wai Keung), it is important for the group to have a lead independent director to ensure an appropriate balance of power, increased accountability and greater capacity of the Board for independent decision-making. . Roles and responsibilities of the Chairman and Managing director Being that Mr Cheng Wai Keung assumes both the Chairman and Managing Director’s roles, Wing Tai should specify clearly the different roles and responsibilities expected of the position in the annual report. By reporting in the annual report, they will minimize any confusion or queries that shareholders have. Companies like SingTel, Tangs, Singapore Airlines (SIA), and Banyan Tree had state out clearly in their annual reports the roles and responsibilities of their CEO and Chairman. 6. Disclosure of process for selection and appointment of Directors
To increase their corporate transparency and as required by Code of Corporate Governance, Wing Tai has to disclose their process for selection and appointment of directors to its Board. The disclosure should include the search and nomination process. Wing Tai could follow what SIA and SingTel had reported in their Annual reports as example. 7. Assessment Process for Board It is important for Wing Tai to disclose the assessment process for its board, inclusive of the evaluation of the directors, should be included in the annual report, as shareholders will base on this information provided to assess if the Board are performing.
By reporting the assessment and evaluation process, shareholders can be assured that the Board and management have done its jobs to maintain an effective and strong Board and management. Wing Tai could take example from SingTel on how they had disclosed the assessment process in their annual reports. 8. Remuneration disclosure of the Top 5 Key Executives. Wing Tai had provided an overview of the top 7 key executives that earn more than $250, 000 in the annual report on a no name basis.
However, it will be better if they name the top 5 key executives and show the level of mix of remuneration on how they are compensated. This information will provide a greater transparency for the shareholders, and thus increase the confidence of the shareholders in Wing Tai. 9. Whistle-Blowing Policy In view of the recent problems in the corporate governance’s scandals (NKF, SembMarine), it is important that Wing Tai adopt a whistle-blowing policy to help the company to detect any improper and/or unethical issues in the company. The policy must protect the interests of the staff who has alerted the company.
By having such policy, employees of the Wing Tai can be assured to report any of such cases confidently to the management and therefore protect the interests of the company. Several companies like SingTel, Tangs, EYS and Starhub already had the whistle-blowing policy in place. 10. Increase in Board Committees Wing Tai’s board can setup more committees on board other than just the Nomination Committee, Remuneration Committee and Audit Committee. I’ll recommend them to setup a Risk Management Committee and Finance and Investment Committee.
As business risks are inevitable for companies, it is important for them to have a risk management plan in place. With the committee, Wing Tai could set out strategies to protect the company’s interest in the possible risks faced by the company. With strategies and plans in place, Wing Tai will be able to minimize any negative impact on the business. In view that Wing Tai has a substantial proportion of its business in property investment, it will be good for the board to have a Finance and Investment committee to oversee the finance and investment plans and strategies for the company. 1. Business Continuity & Crisis Management Plan Due to the uncertainties in the business world, it is important for every company to have Business Continuity & Crisis Management Plan. Such plans will help company to minimize the negative impact on business on crisis like SARS, Avian Flu, strikes and so on. With such plan, the business will be able to continue to operate in times of crisis, and this will in turn reduce any loss or negative impacts to company. Similar family owned business like Tangs had setup such plans and I would recommend that Wing Tai to follow suit. 2. Corporate Social Responsibility By moving into corporate social responsibility (CSR), companies will be able to improve their corporate image and also further improves their relationship with the different stakeholders like the Government, the society at large, the employees and so forth. This improvement in relationship will definitely bring about both tangible and intangible benefits to the company. Therefore I’ll suggest Wing Tai to bring the company to another level by moving into CSR to benefit the society at large and also to benefit the company.
Taking from examples of how SingTel and Banyan Tree had made a difference to their company by having CSR. 13. Director’s Fee Structure It is important to show shareholders how the directors’ fee are justified and compensated, thus Wing Tai should disclose the director’s fee structure in the annual report similar to how SingTel, Starhub and SIA had done. By disclosing the fees structure ensure greater corporate transparency in the company and this will improve the shareholders’ confidence of the company. 14. Communication with shareholders
I would suggest Wing Tai to improve communication with shareholders by improving the information that is shown on their corporate websites and also be more active in their media relations. E)Comparison of Singapore’s Code of Governance and OECD Code of Corporate Governance The following table (Table 2) sets out the differences between Singapore and OECD’s Code of Corporate Governance. No. OECDSingapore 1Stakeholder as primary focusStakeholder not as primary focus -Singapore generally has legislation to protect the interest of stakeholders -Eg.
The Employment Act 2Wide scope of coverageLimited scope of coverage -Strong focus on internal controls and audit 3Less focus on financial disclosureHigh focus on financial disclosures 4Less emphasis on the mandatory committees requiredEmphasis the mandatory requirement to have at least the Remuneration Committee (RC), the Audit Committee (AC), and the Nomination Committee (NC). 5Primary requirement is to monitor corporate managementPrimary requirement is to bridge information gap between the corporate insiders and investors