Gibson Dunn Partner Robson Lee on the Importance of Good Governance for Charities
The thing about financial scandals involving charitable organisations is that you never know the charity that you’re helping could be mismanaging public donations. Punishing the errant culprit(s) may not go far enough to placate the doubts of the public. Worse, a single major incident of fraud, dishonesty or flagrant conflicts of interests could contribute to burgeoning public inertia to help the poor and needy. It’s the reason why many of us are slow to entertain fundraising campaigns claiming to assist the poor or needy, wary of potential deceit or scams. But what if they were really in need?
All this uncertainty wouldn’t have existed had there not been egregious and dishonest conduct by senior management of certain major charitable organisations in the past that created widespread public disquiet and cynicism. This is why Robson Lee, partner at Gibson, Dunn & Crutcher LLP, believes that good governance is a necessity for charitable organisations. We sought the views of Robson who shared his take on what charities can do to prevent the mismanagement of funds and to reinforce public confidence.
High Net Worth: How does negative publicity affect the perception of charities?
Robson Lee: Whenever the media reports that a particular charitable organisation (or its managers are) is under investigation for fraud or dishonest behaviour, there is invariably widespread public disquiet. The end result of a public trial where criminal charges are brought against the errant managers of the organisation could likely have a consequential negative effect evoking distrust, cynicism and increasing apathy towards charitable missions and fundraising activities to help the poor and needy.
Do you think charities should be regulated like listed companies?
A charity is a public institution that must be established on the pillars of public trust and confidence. This is notwithstanding the fact that the organisation is non-profit oriented founded to promote non-pecuniary missions and causes such as the arts, education, a particular religion or other forms of activities and interactions promoting the interests of various communities and social groups.
Unlike a public listed company that is robustly regulated by the rules of the stock exchange and subject to constant scrutiny and enforcement actions by the securities market regulator, charities in Singapore are given more leeway and indulgence as most charities rely on volunteer or pro bono managers who are not remunerated.
“Mismanagement of any major charity has the same deleterious effect on public confidence not unlike an erosion of confidence in a financial market in the event of a major corporate failure.”
What’s the difference between good corporate governance for businesses, versus good governance for charities?
A public listed company (listco) is legally required to promptly disclose all material price-sensitive and trade-sensitive information to the market by way of the prescribed mode of public announcement stipulated by the stock exchange. Listco is also required to promptly and publicly announce any interested person’s transaction and/or major transaction that crosses the prescribed threshold value stated in the listing rules. Beyond the respective prescribed threshold value, listco is also required to seek approval at a general meeting for very major transactions involving the group. Independent shareholders’ endorsement (independent of the votes of the relevant interested persons and their associates) in a general meeting is also required for any interested person’s transaction that crosses a certain threshold value.
A charity is, however, not regulated to the same extent like a listed company in Singapore. It is thus cardinal that the management committee or trustees of a charity adhere to the same guiding principles of integrity, transparency and legality that govern listed companies and public institutions. It is noteworthy to highlight that the managers or trustees of a charity are reposed with fiduciary duties like directors of any company. Mismanagement of any major charity has the same deleterious effect on public confidence not unlike an erosion of confidence in a financial market in the event of a major corporate failure. If major lapses are left unchecked and errant officers unpunished, the spirit of philanthropy could rapidly be eroded in our society consequent upon widespread declining public confidence in the governance of charities.
What has been done by the government to promote good governance for charities?
The Ministry of Culture, Community and Youth (MCCY) and the Singapore Charity Council published and regularly update the Code of Governance for Charities and IPCs that principally has the following objectives: 1. Make charities more effective by sharing recommended practices on how effective charities are governed and managed; 2. Provide guidance to Board members to help them carry out their duties as fiduciaries (representative entrusted to act in the interest of the charity); 3. Boost public confidence in the charity sector by setting the standards of good governance for charities to aspire towards.
The Charity Council initiated the Charity Governance Awards (CGA) to accord recognition to charities that have adopted the highest standards of governance. CGA aims to promote good governance in the charity sector by acknowledging the excellent work of charities, while inspiring others to emulate their best practices.
The Charity Council also introduced the inaugural Charity Transparency Awards in 2016. This awards initiative is to commend charities that have good disclosure practices to underscore the principle that transparency and good disclosure practices are important pillars of good governance for charities.
When you were on the Singapore Chinese High School Board of Directors, how did you contribute to the governance of the Hwa Chong Schools?
I served on the Board of Directors of the Singapore Chinese High School (SCHS) since 1997 and only stepped down on 4 January 2020 after more than 20 years of service, with the last two years as Chairman of the Board. SCHS is the parent organisation of Hwa Chong Institution and Hwa Chong International (collectively, the Hwa Chong Schools). The Hwa Chong Schools are Singapore’s premier educational institutions and are constituted as public charities. As Board Chairman, I presided over the 100th anniversary whole year celebrations of Hwa Chong in 2019. Hwa Chong was founded on 21st March 1919 by the late renowned philanthropist, Mr Tan Kah Kee.
In 2004, as Board Secretary, I was instrumental in the merger of the then Chinese High School and Hwa Chong Junior College to form Hwa Chong Institution which started providing a 6 years integrated through-train high school education programme in 2005. I was also one of the founders of Hwa Chong International in 2005 that is one of three established government-aided schools which were awarded a licence by the Ministry of Education to operate an international school providing the International Baccalaureate programme in Singapore.
On 22 August 2019, as Chairman, I negotiated and signed on behalf of SCHS the Strategic Collaboration Agreement with the CapitaLand group to set up an international school providing the IB programme in the Guangzhou Knowledge City.
During my more than two-decade tenure as a pro bono Director and in my last term as the Board Chairman of SCHS, I oversaw the establishment of a transparent governance structure and legal management principles that balance the traditional Chinese ethics and cultural values of a century-old educational institution for SCHS and the Hwa Chong Schools. The governance structures and management principles while encompassing the heritage values of traditional Chinese schools have to concurrently be in sync with the proper governance expected of the public educational institutions under SCHS. I believe and have put in place the foundations and core principles of management and operations that encapsulate the three cardinal pillars of 合情，合理 ，合法 for the governance of the Hwa Chong Schools.
Have the government’s efforts to promote good governance and best practices for charities been fruitful?
For 3 years since 2017, I have served as a judge in the Charity Transparency Awards organized by the Charity Council. I am heartened to see many charities diligently progressing in the areas of good governance and transparency practices over the last few years. While there are only so few winner awards for the best governed and best-managed charities, it is most encouraging to witness many charities winning commendation awards for the good efforts and improvements that they have respectively made over the years in the management and operations of the respective charities.
I would like to register my ringing endorsement of the various constructive initiatives of and the invaluable guidance provided by MCCY and the Charity Council to level up the standards of good governance and high transparency practices of charities in Singapore over the years. While charities are not governed in the same manner and extent like listed companies in Singapore, the growing emergence of well-run charities in Singapore principally through continuous education, consistent encouragement and regular accolades endorsement by the government is patent evidence that the nuanced and calibrated approach adopted by the government to engender good governance of charities is making good progress. The moral suasion approach is an effective means to encourage pro bono public service without compromising high standards of governance for charities in Singapore.