IntroductionCapitaland company, and fraud. It applies to

IntroductionCapitaland Commercial Trust Limited (CCT)CCT sells real estate investment trust (REITs) by investing in properties in Singapore, on the Singapore Exchange Securities Trading Limited. Main key officers of CCT are Soo Kok Leng, Lim Ming Yan and Lynette Leong Chin Yee. (Refer to Appendix 1)CCT achieved being the largest commercial REIT based on market capitalisation and owns a portfolio of prominent buildings. E.g. Grade A office tower, Capital Tower. It achieved 7 corporate awards over the past three years. E.g. Won the Gold award for Best Investor Relations in Singapore Corporate Awards 2017.Singapore Code of Corporate Governance (Code)The code was introduced on 21 March 2001 and the latest review was on 2 May 2012. The rationale behind the Code is to prevent corporate abuse, mismanagement of a company, and fraud. It applies to companies that are listed on the Singapore stock exchange. In the event of non compliance, the company is required to disclose their corporate governance practices and explain why they did not comply to the Code in their annual report. Five areas selected from the CodeBoard’s conduct of affairsPrincipleLead and control the company, and ensure long term successes of the company with the management. (Code 1) Guidelines (Code 1.1-1.7);Follow 6 board roles (Refer to Appendix 2)Perform duties and responsibilities. Disclose disseminated authority of the board committee.Have regular meetings, the meetings and attendees must be documented. Reserve authority on certain matters which are unauthorized to the Management.Report the, induction, orientation and training of all directors, and provide training for skills lacking.Establish duties and obligations in a formal letter to the directors upon appointment. Rationale for guidelinesEnsure the board members are capable, aware, and performs designated duties acting on behalf of the Company and shows interests in the Company by attending board meetings. Reserved authority prevents the management from making decisions that causes conflict of interests instead the Board will make the decisions that benefits the company.Comparison to the UK Code The UK’s Code states the same principles and guidelines. (UK’s code A.1, A.1.1-2 and B.4.) In addition, it states companies should have insurance coverage for legal action against its directors (UK’s code A.1.3). Evaluation of the CodeThe Code lacks the guideline mentioned in the above. Hence, insufficient to prevent corporate abuses, fraud or mismanagement because directors can break the laws and get away with it, if the Company does not have enough money to take legal actions. It should be incorporated to protect Companies which may not have enough funds to take legal actions against directors in such events.Feedback on CCT’s codeFrom CCT’s Annual Report (AR)’s corporate governance culture principle 1, the Board has long term objectives, controls complying to SGX-ST guidelines, oversees management’s performance and sets values and standards to meet stakeholders obligations. Considered sustainability issues as, environmental sustainability and community outreach programmes are conducted (AR pages 52-81). Disclosed disseminated authority, duties and responsibilities given to the Board committee. It meets every quarter, and number of meetings and attendees are disclosed. Established 4 matters only the Board can authorise. New directors go through a job induction, orientation, and are issued a formal letter indicating their duties and obligations. Directors’ trainings are documented and are provided training opportunities. Hence, CCT is compliant to the Code. However, could take into consideration having an insurance coverage for legal actions against its directors as a safety measure.Chairman and Chief Executive OfficerUnder Code 3, it states that there should be a clear division of responsibilities between the leadership of the Board and the executives responsible for managing the company’s business. These are the guidelines. (Code 3.1 to 3.4)The Chairman and the CEO should be separate persons. The company has to disclose on whether they are from immediate family. The Chairman should lead the Board to ensure its effectiveness on all aspects of its role, set agenda to ensure that there is enough time available for discussion of all agenda items. A lead independent director must be assigned where the CEO and Chairman are the same person, from the same immediate family, Chairman part of the management team or Chairman is not an independent director. The independent directors should meet periodically, led by the lead independent director, without the presence of the other directors, and the lead independent director should provide feedback to the Chairman after such meetings. The rationale for the guidelines is to ensure there is equal amount of power. It also clearly define their individual rolesThe UK code states the same guideline (A.2.1, A.3, A.4.1, A.4.2.). However in the UK code (A.4.2), it says that the independent director should at least meet annually without the Chairman to appraise the Chairman’s performance.Singapore’s code is sufficient in addressing corporate abuse, fraud and management as the law ensures that there is clear division of roles of the CEO and the Chairman to ensure no individual possess considerable power.CCT is compliance to the Singapore’s code, under Principle 3. The CEO and Chairman are of different person and their roles are divided. (3.1) The Chairman is responsible in facilitating the effectiveness of the board. It sets agenda to promote constructive engagement in the board (3.2). As the CEO and the Chairman are separate person, not from immediate family, the Chairman not part of the management team, the Chairman is not an independent director, a lead independent director is not needed for CCT. (3.3 and 3.4) Hence CCT is compliant to the code. The company can improve by having independent directors to meet annually to appraise the Chairman’s performance.Level and Mix of RemunerationUnder code 8, it says that the level and structure of remuneration should be aligned with the long-term interest and risk policies of the company to motivate directors and key management personnel. These are the guidelines (Code 8.1 to 8.4)Companies should have a significant and appropriate proportion of remuneration structured to link rewards to corporate and individual performance. Executive directors and key management personnel are encouraged by long-term incentive scheme and remuneration Committee (RC) should review and evaluate carefully whether they are eligible for the benefits. Remuneration to non-executive directors should be appropriate to the level of contribution and are not to be over-compensated. Companies are encouraged to use contractual provisions to allow company to reclaim incentive of remuneration in circumstances of misstatement of financial results or misconduct which result in financial loss to the company. The rationale of the guidelines is to ensure that directors are compensated fairly. As RC will review the remuneration paid, it ensures that no extra remuneration are given to. Under UK code of governance section D, it is similar to Singapore’s code of governance. Instead of having a contractual provision, UK are cautious in providing compensation to reduce losses. In addition, it also states that contracts to new directors are set at one year or less. Singapore’s code is sufficient to address corporate abuses, fraud and mismanagement. Remuneration must be reviewed and approved by the RC whether directors are entitled for the benefits to reduce the cost. It addresses the use of contractual provisions to allow company to reclaim the remuneration if there is any misconduct. Under principle 9 of Capitaland Commercial Trust (CCT)’s annual report, they maximise investment returns by focusing on generating rental income and improved asset value. Payment of Directors’ fees are aligned with CCT’s long-term growth and value, and long-term equity-based reward plans were provided. Internal equity were managed to ensure that remuneration system were fair. Annual bonuses were based on the achievements of annual performance target for each key executive, where annual performance is align to business strategy and linked to individual and CCT’s performance. Units were also awarded to align the interest of key management personnel with long term interest of Unitholders.CCT can improve their remuneration by using contractual provision where company can claim remuneration from directors or key management personnels if there is any misconduct found. This helps CCT to avoid over-compensation and prevent fraud and mismanagement. Risk Management and Internal ControlsPrincipleMaintain a sound system of risk management and internal controls to safeguard shareholders’ interests and company’s assets. Guidelines (11.1-11.4):determine risk appetite and related policies, and assist management in overseeing the design, implementation and monitoring of the systems. review it’s adequacy and effectiveness internally or with assistance of competent third parties.Obtain assurance from the company’s CEO and CFO that they had properly maintained financial records that gives a honest and just view of company’s operations and finances.Form a separate risk committee to assist in overseeing the company’s risk management framework and policies. RationaleEnsure that the Board is responsible over its systems and has a strong measures to mitigate against the threats faced by the the company. A separate risk committee assist the Board in the event of negligence.  Comparison to the UK CodeUK code states the same principle and guidelines. (C.2, C.2.2-C.2.3) Additionally, C.2.1 states that beside having a strong assessments of principal risk. The Board should describe the risk identified and explain how are they mitigated. Evaluation of the CodeSingapore’s code is sufficient to address corporate abuses, fraud and mismanagement. As the Board follows closely with the management in setting up and maintaining their risk management and internal control systems then reviews the adequacy and effectiveness of it annually which includes financial, operational, compliance and information technology internal controls. By suggesting a separate risk committee to assist the Board in overseeing the systems, a fair view is ensured. Feedback on CCT’s CodeFor CCT’s Principle 11, The board is responsible for governing company’s risk appetite and ensuring that management maintains a good control of the systems to protect shareholders rights and company’s assets. Audit Committee is appointed to help oversee the risk management framework and policies by assessing the adequacy and effectiveness of internal controls system and review if it is consistent with CCT’s risk appetite. Lastly, the management adopts an Enterprise Risk Management Framework which sets out the standard for managing risk in an integrated, systematic and consistent manner which require a Risk Register which identify material risks that CCT faces and corresponding internal controls that is mitigating against it. Therefore, CCT is in compliance with the Code. However, CCT should consider describing the significant risks faced by the company and how they are mitigated. Communication with ShareholdersPrincipleUnder Code 15, it states that companies should actively engage shareholders and set up an investor relations policy for regular, effective and fair communication with shareholders. Guidelines (Code 15.1 to 15.5)Companies should set up an effective investor relations policy to regularly communicate pertinent information to shareholders and disclose information in a detailed and forthcoming way.Information should be disclosed timely through SGXNET and other information channels. When there is inadvertent disclosure made to a particular group, companies should make a public disclosure as soon as possible.Regular dialogues with shareholders should be maintained to receive views and address concerns. Board should state the steps taken to solicit and understand shareholders’ views in the Annual Report.Companies are encouraged to have dividend payment policy and should communicate to the shareholders and disclose reasons when dividends are not paid. Rationale for GuidelinesEnsure shareholders have a thorough view of business operations and are timely informed about significant information. Ensure shareholders have enough platforms to express their views and prevents management from abusing their power and hide things from shareholders.Comparison to UK codeUK code states the same principles and guidelines (E.1.1 and E.1.2)Evaluation of the codeSingapore’s code is enough to address corporate abuses, fraud and mismanagement as shareholders are provided with relevant information of companies and are able to express views of management with regular dialogues. Due to transparency, there will be no fraud, corporate abuses and mismanagement as everything is open for shareholders’ review.Feedback on CCT’s codeUnder Principle 15 of the CCT annual report, CCT keeps all unitholders, stakeholders and analysts informed of any changes of business timely and consistently. There is an Investor Relations & Communications department which helps with constructive communication with the unitholders. Investor relations policy are implemented and unitholders are engaged actively to express their views with the Board and Management during or after general meetings. Corporate Disclosure Committee is set up to assist the Board regarding meeting the obligations in disclosure and compliance to the laws and regulations of Singapore. Hence, CCT is compliant to the code. For better communication with shareholders, CCT can consider having more platforms for interaction and implement dividend payment policy to prevent misunderstanding regarding dividend payment. AppendixKey officers of CCTPositionKey officersNon-Executive Independent DirectorsSoo Kok Leng (Chairman)Dato’ Mohammed HusseinLam Yi YoungGoh Kian HweeNon-Executive Non-Independent DirectorLim Ming Yan (Deputy Chairman)Wen Khai MengExecutive Non-Independent DirectorLynette Leong Chin Yee (Chief Executive Officer)Board rolesThe board should set strategic objectives and lead the company to meet them, Form internal and external controls for the Company, Review management performance, Identify the Company’s key stakeholders, Set values and standards to satisfy obligations to stakeholders, and consider sustainability issues. List of ReferencesMonetary Authority of Singapore. (May 2012) Code of Corporate Governance from http://www.mas.gov.sg/regulations-and-financial-stability/regulatory-and-supervisory-framework/corporate-governance/corporate-governance-of-listed-companies/code-of-corporate-governance.aspxFinancial Reporting Council (April 2016) The UK Corporate Governance Code 2016 from https://www.frc.org.uk/getattachment/ca7e94c4-b9a9-49e2-a824-ad76a322873c/UK-Corporate-Governance-Code-April-2016.pdfSoo. K.L. and Lynette Leong C.Y. (27 February 2017) CapitaLand Commercial Trust Management Limited Annual Report 2016 fromhttp://infopub.sgx.com/FileOpen/CapitaLand_Commercial_Trust_AnnualReport2016.ashx?App=Announcement&FileID=443998