Singapore is on a mission to revitalise our capital markets.

A high-level working group chaired by Minister Chee Hong Tat has been set up, and a slew of measures rolled out too. Most recently, the Monetary Authority of Singapore (MAS) placed S$1.1 billion into the hands of an initial three fund managers to invest in stocks listed on the Singapore Exchange (SGX), with an additional S$3.9 billion to come. It has further committed S$50 million to support equity research and reinvigorate the listed product ecosystem. Other initiatives have also been announced, including measures to boost investors’ recourse against errant boards and management. In tandem, the Code of Corporate Governance is also being refreshed.

At the same time, high drama has played out on Singapore’s corporate stage. The battle for control of the boardroom in family-controlled City Developments kept the business community glued to the news for weeks. The liquidators’ claim against Goh Jin Hian, a non-executive director in a company defrauded by the executive management who had absconded, raised alarm in the independent director community. A collective sigh of relief was heaved in boardrooms when the Appellate Court reversed much of the High Court decision, clarifying that the role of director is to be sentinel, not sleuth. These cases engendered some soul-searching into the nature of directors’ duties in Singapore.

Regulatory and shareholder demands on directors are clearly increasing. Concurrently, the issues that the board of today is required to oversee are expanding in number and complexity.

It is high time to re-examine the role of directors in listed companies.

Directors’ Expanded Duties

The Companies Act requires directors to manage the business of the company and to act in its best interests, honestly and with reasonable diligence. In law school, undergrads are taught that the interest of the company is that of the shareholders when the company is solvent, and its creditors when it is not.

But the business landscape has changed. Additional “stakeholders” have sprung up. ESG (environment, social and governance), charitable endeavours and environmentally friendly business practices may not directly improve the bottom line for shareholders but are becoming metrics against which the company’s directors are measured.

Now layer on the fact that the world has become more complex. While directors previously focused mainly on financial, legal, and operational concerns, they must now grapple with serious emerging issues like climate change, sustainability and cybersecurity, which require specialist expertise beyond the average lawyer or accountant. More shareholder activism also increases the risk of directors being sued.

In this evolving operating environment, what is the new role of the listed company director?

I suggest that directors’ obligations fall broadly into two baskets.

Risk Management

First comes risk management.

This is the traditional understanding of the board role, and the aspect that the Companies Act and common law have articulated in detail. Into this basket falls managing legal, financial and business risks, all well understood by the business community.

But the range of risks facing companies has expanded significantly.

ESG reporting is now mandated by listing rules and is a key metric used by institutional investors to evaluate a company before they will plough in capital. Under this broad umbrella, climate change, diversity in hiring policies and sustainable business practices have become hard deliverables.

Compliance is another growing area of risk, with more global scrutiny on anti-money laundering, anti-bribery, and regulatory compliance.

And those are just the newly added risks facing boards today. Directors also have to consider emerging risks. The rise of artificial intelligence, the acceleration of digital disruption and increasing instances of cyber attacks make technology-associated risks a concern.

Beyond these, the modern listed company director must also stay on top of geopolitical and societal developments to consider their likely future impact on the company and the industry in which it operates.

Value Creation

The second basket – that of director as value creator – is less commonly recognised.

“Value creation” sounds like a waffly, intangible mission, but it is an increasingly critical one.

Previously, the equation was simple. It was for management and the controlling shareholders to build the business. If the business did well, profits would go up and public investors would pile in.

In today’s world, listed companies navigate more complex terrain. Profitability is no longer the only game in town.

A small/medium business may be money-making but if there is scant research coverage, retail investors will not know about it, especially if it is not in a sexy sector. Investor relations skills are thus crucial to put the company on investors’ radar screens.

Also important is understanding the metrics that institutional investors use to assess potential buy orders, in order to effectively position your business to greater advantage.

While profitability is still important, nowadays investors – especially the more sophisticated ones who can write larger cheques – consider a wider range of factors. Among them: ESG performance, growth potential and market penetration.

Boards also have to provide oversight on strategy and long-term sustainability. Keeping abreast of technological advancements and even changing societal expectations will be key performance indicators.

Nor can stakeholder and brand management be ignored. Companies may get punished for unethical decision-making or delayed disclosures. The crisis management response that data platform company Astronomer swung into when its chief executive officer and its human resource head were caught canoodling at a Coldplay concert – hiring Hollywood star Gwyneth Paltrow to front a disaster recovery publicity campaign – showed the need for a smart, substantive and speedy reaction.

Reinventing the Singapore Listed Company Director

Singapore boards need to understand the expanded purview of their roles and move beyond traditional risk management.

They also need equipping. Diversity targets, net-zero aspirations and external communications are new, and varied challenges. Courses should be structured to prepare them for the new iteration of their role. These could include baseline skills for small/medium companies like investor relationship management and presentation skills. More established companies would need help in forward-looking training, for example understanding the complexities of ESG compliance to implement effective change and not just produce a virtue-signalling Sustainability Report. Capacity-building related to AI adoption to unlock productivity savings and to manage cyber risks is also needed.

We are on track to improve our capital market. Market sentiment has improved since the MAS announcements. But government capital to shore up the stock market is not sustainable. To attract big foreign money, small and medium Singapore companies will need to embrace a broader definition of corporate governance and ultimately reinvent the board to be future-ready.