A company that did not have independent directors making up at least one-third of the Board offered the following explanation: “The Board believes that there is an independent element on the Board and that it is able to exercise independent judgment on corporate affairs”. The statement does not provide any evidence or information to shareholders on how the independent element is achieved in spite of the smaller number of independent directors. 11. Companies should provide meaningful explanations of their reasons for deviation, and not opt for “template” disclosures that shed no light on these reasons, or worse, obfuscate the issue. There is scope for standardising the format in which disclosures of compliance with key principles in the Code are made, to facilitate comparability across listed companies. MAS and SGX will be exploring this in the coming months. 12. In strengthening market discipline, disclosure is one side of the coin; the other side is the considered exercise of shareholder rights. Shareholders can play an important role in enhancing corporate governance by studying corporate statements, attending general meetings, and voting on key issues. 13. But the reality seems to be that companies have limited engagements with shareholders on governance issues, and most institutional investors do not vote or attend AGMs. The situation may be improving though, at least in Singapore. According to the CLSA Corporate Governance Watch 2010, institutional investors are becoming more active in voting their shares and engaging with companies in Singapore. 14. Shareholders are not the only people who can exercise market discipline.

10 Asian regulators on the Basel Committee and on the FSB can help to present Asia’s perspectives at these international forums. Central banks as well as international organisations such as the International Monetary Fund (IMF) and the Asian Development Bank (ADB) should also weigh in to lend insights from their economic surveillance work. This will allow regional concerns to be sufficiently factored into the global rule-making and evaluation process. The craft of supervision 11 Rules and standards cannot replace judgment. Good supervisory instincts and technical competence are required to discover, scrutinize and evaluate key risks. This can only be done if banking supervisors do not see their role as a mere compliance function. An effective banking supervisor must be able to assess a bank’s understanding of its risks, its business practices as well as judge its corporate governance and culture. 12 The need for consistency and rigour also mean that supervisory judgment is not just an operational matter. Having formal supervisory decision-making forums is an important component of a good supervisory process. For example, in the MAS, our Banking Supervision heads come together in regular meetings to guide supervisory reviews and decisions. As an integrated supervisor, I also chair a Management Financial Supervision Meeting as well as a Regulatory Actions Meeting that oversees the broad scope of our supervisory policies and enforcement actions respectively, across banking, insurance and capital markets activities. In other words, supervisory practices require as much thought and policy considerations as the rules and regulations.