Sign up for regular news, views and insights about corporate governance

Name
Email
Company
Job title
Industry

Close

Setting the benchmark in corporate integrity

CapitaLand’s corporate courage

Consistently punching above its weight and  beyond corporate governance guidelines, CapitaLand strives to implement superior practices that prove its business integrity
Capital Tower, Singapore

Consistently punching above its weight and beyond corporate governance guidelines, CapitaLand strives to implement superior practices that prove its business integrity

CapitaLand Limited, one of Asia’s largest real estate companies, is committed to building a sustainable future for its stakeholders and for generations to come. Headquartered and listed in Singapore, the company’s businesses in real estate and real estate fund management are focused on its core markets of Singapore and China.

Over the years, it has been building a lasting company, adding value for its stakeholders across a diversified portfolio of homes, shopping malls, offices, serviced residences and mixed developments. The company also has one of the largest real estate fund management businesses with assets located in Asia. CapitaLand uses its significant asset base, real estate domain knowledge, product design and development capabilities, active capital management strategies and extensive market network, to develop successful real estate products and services. In the first half of 2013, CapitaLand Limited achieved a net profit of S$571.3m and revenue of S$1,844.6m, amid global economic uncertainty.

Good corporate governance policies and practices, coupled with sound risk management have been vital in driving CapitaLand’s long-term sustainable growth and shareholder value. It strives to achieve excellence in corporate governance, by establishing a robust framework with clearly defined principles, policies and processes.

Building robust governance
CapitaLand’s corporate governance structure is built upon the guidelines outlined in the Singapore Code of Corporate Governance by the Monetary Authority of Singapore. The Code, a set of principles-based standards, represents the best practices of corporate governance for listed companies in Singapore. In light of corporate mismanagement incidents worldwide, the Code is consistently reviewed and refined by the Singapore authorities. The Code was first introduced in 2001, and revised in 2005, and again in May 2012.

CapitaLand’s policies and practices (including its Board Charter and Terms of Reference of its board committees) are already compliant with the high standards of the Code, often surpassing the guidelines.

One of the main focus areas of the Code is the constitution of an effective board. It is critical that boards are structured to exercise a strong judgment that is independent from management and shareholders, with more than 10 per cent of the voting rights. This ensures that interests of minority shareholders are taken care of. An effective board also has well-defined responsibilities, enshrined in the Board Charter.

According to a joint study by CPA Australia and the National University of Singapore Business School, more than three quarters of listed companies in Singapore have had three or fewer independent directors on their boards from 2010 to 2012. The average board size of seven members implies that a majority of companies commanded less than 50 per cent independence. Over the same period, out of the 12 members that made up CapitaLand’s board, 10 are independent – more than 80 per cent. According to the study, only three percent of companies had more than six independent directors on their boards.

To avoid concentration of power by any one individual, the Code recommends that separate individuals hold the positions of Chairman and President & Group CEO. Only one third of listed companies in Singapore adhered to this guideline in 2012. At CapitaLand, its non-executive Chairman Ng Kee Choe leads the board and acts independently in the best interests of CapitaLand and its shareholders, while President & Group CEO Lim Ming Yan is responsible for running the group’s business. High levels of board independence and separation of the role of the Chairman and President & Group CEO have created a healthy professional relationship between the board and management, and clarity of roles.

To assist the board in its oversight functions, various committees – namely Audit Committee, Corporate Disclosure, Executive Resource and Compensation, Finance and Budget, Investment, Nominating, and Risk Committee – have been constituted with clear terms of references. Board performance is assessed by an independent external consultant annually.

This robust corporate structure allows the board to function at its best, with each member using their skills, experience, insight and sound judgment to advance the best interest of CapitaLand. The directors are business leaders and professionals with financial, banking, real estate, tax, legal, economics, investment, accounting and manufacturing backgrounds. CapitaLand’s management continues to benefit from their diverse experience and perspectives.

The company’s articles require a third of directors to be re-elected by shareholders at every AGM. New directors appointed by the board during the year must retire and stand for 
re-election at the next AGM. CapitaLand encourages greater shareholder participation by employing electronic polling for all resolutions.

An open organisation
Another key pillar of corporate governance is how companies communicate with investors and other key stakeholders. Communication is no longer just about holding AGMs and publishing statutory accounts; it involves tailoring communication initiatives to the needs of stakeholders. CapitaLand’s commitment to stakeholder communication is clearly outlined in its shareholders’ communication and investor relations policy.

Other than timely updates of quarterly financial results and corporate activities, there is a high level of investor interaction through face-to-face meetings with stakeholders, teleconferences, investor conferences, roadshows, site visits and analyst conferences and briefings. In 2012, CapitaLand’s management conducted more than 500 meetings with fund managers and institutional investors.

CapitaLand also engages the media in its key markets. Interviews taken by senior management with Singapore print and broadcast media have generated understanding of CapitaLand’s strategy and operations. In 2012, a familiarisation trip for the media and analysts showcased the Group’s work in China. CapitaLand revealed how it intends to deepen its presence in China with a display of residential developments (mid to high-end properties) and shopping malls. Other communication tools such as news releases and its user-friendly corporate website provide real-time updated information to the media and investment community. It is incredibly easy for stakeholders to obtain information about the company.

The community has recognised CapitaLand’s efforts in stakeholder communication and acknowledged CapitaLand’s position as an industry leader in this area. CapitaLand won numerous awards and accolades for transparency, investor relations and stakeholder communication in 2012. These include Most Transparent Company (Property Category) by the Securities Investors Association (Singapore), awarded for the 12th consecutive year, as well as the Golden Circle Award, the highest honour for the most transparent company. Fund management firms, stock broking and research houses, and the media nominated the winners. They were assessed over a year on timeliness of corporate disclosures, frequency, clarity and substantiality of their announcements, as well as willingness to disclose information to analysts and the media.

Risk management

In recent years, risk management has gradually shifted from being a compliance necessity to a competitive differentiator. This is driven by an increasingly volatile business environment, complex flow of information and greater reliance on technology. Managing risk is critical for CapitaLand as a way to create and preserve value and safeguard shareholders’ assets.

CapitaLand adopts a holistic approach to risk management through its Enterprise Risk Management framework. Regular risk assessments identify key risks and ensure that they are managed. One methodology measures the potential value deterioration of CapitaLand’s key risk exposures by leveraging an innovative value-at-risk model adapted from the banking industry, and specially tailored for the real estate industry.

For investments above a certain value, risks are evaluated independently to ensure potential returns are commensurate with the risks, with weighted average cost of capital and hurdle rates used as investment benchmarks. Country concentration limits are also set by the risk committee to ensure a prudent risk profile is maintained. CapitaLand aspires to create a 
risk-aware culture that embeds prudent risk-taking in decision-making and business processes.

The risk owners at CapitaLand’s business units form the first line of defence against risk. They have primary responsibility for the management of risks; accountability and ownership should be as close as possible to the activity that creates the risk. The second line of defence comes from those responsible for providing risk oversight and guidance, including the Risk Assessment Group. These specialist support functions report to the Enterprise Risk Management Committee (comprising senior management representatives from CapitaLand), which in turn reports to the President & Group CEO and the Risk Committee. The third line of defence is the independent assurance provided by external auditors, assessing the effectiveness of the risk management framework. This ensures risk management accountability at different levels within CapitaLand.

CapitaLand also has a strong anti-corruption stance and a comprehensive system to ensure its staff and supply chain understand this. Its top-level management commitment – ‘Tone from the Top’ – is the President & Group CEO’s anti-corruption policy and zero tolerance to bribery and corruption. The anti-corruption policy sets out principles on ethical conduct in governing business relationships, describes the process of policy implementation, assigns clear responsibility to management and employees to maintain anti-corruption culture, and provides an independent channel of reporting violations directly to the chairperson of the Audit Committee.

CapitaLand is committed to enforcing discipline procedures. A formal company pledge to uphold integrity and not indulge in corruption, bribery and unethical acts needs to be signed off by every employee upon joining the CapitaLand. This is reaffirmed in the annual employees’ declaration. Employees acknowledge disciplinary actions will be taken against them for non-compliance, and they must report any malpractice that comes to their attention under the company’s Whistle Blowing Policy.

Corporate governance is not a box ticking exercise for CapitaLand. Practices put in place are driven by the principles of the Code, drawing from the spirit of CapitaLand’s core values. This is how CapitaLand can continue to build a sustainable future for its stakeholders and for generations to come, while creating lasting value for its shareholders.

To find out more about CapitaLand’s corporate governance and sustainable practices, CapitaLand Sustainability Reports are available online at: www.capitaland.com/sustainability/sustainability-report

CapitaLand has won the Corporate Governance Report award for Best Corporate Governance, Singapore, 2013.

 

News

Hedge fund group sues Cayman Islands over corporate governance reform

As local authorities strive to make hedge funds based in the islands more transparent, some mangers object

Energy Management Software new ‘must have’ for large businesses

There has been an emergence of energy management software since the passing of new European legislation that large businesses must undertake energy use audits

Japanese companies urged to reconfigure governance

A recent survey has indicated that investors are dissatisfied with the current system of governance commonly undertaken by Japanese companies, many urging for more comply-or-explain systems equivalent to that of EU-based companies

Michael Woodford, king of whistleblowers

The former Olympus CEO exposed a $1.7bn fraud at the heart of one of Japan’s most important corporations, and became a symbol for whistle-blowers everywhere

Notable reports

Some of the leading reportage in corporate governance

Xerox chief accounting officer appointed to the IASB

Trustees of the IFRS Foundation have announced the appointment of Gary Kaburek as the sixteenth member of the International Accounting Standards Board

First IATI annual report published

Initiative outlines both its achievements and intentions for bettering governmental transparency in relation to aid spending in developing nations

New union group pledges to ‘tackle corporate responsibility’

The Trade Union Share Owners group will put union values at the heart of corporate governance through the Trade Union Voting and Engagement Guidelines

Court rules “unenforceable” arbitration

US courts find arbitration agreements signed by employees are ‘unconscionable’

Shareholders reject Julius Baer pay report

Disgruntled shareholders at Swiss private bank vote to reject remuneration report at annual meeting

Diversity: missing the wood for the trees?

Much has been made of the lack of women on boards recently. But positive discrimination has it’s flaws, writes Melanie Wadsworth

Churchill Mining grants 5.4 million share options

Following what many have perceived to be detrimental legal altercations through the past year, the London-listed mining company has since granted new share options to many of its employees

A new model for financial reportage

A widely accepted problem of financial disclosure and reportage is that no two institutions use the same methods

A self-governing model

Sime Darby’s self-governing model allows it to stay focused and nimble

EU outlines new disclosure guidelines for extractive industries

Newly introduced laws are to ensure resource-rich nations are less so made subjects of exploitation, requiring for a much greater extent of transparency among extractive industries