37% of independent directors exceed 9-year tenures, steps needed to meet new listing rules: Report

37% of independent directors exceed 9-year tenures, steps needed to meet new listing rules: Report

The biennial survey also found that 3.5 per cent of Singapore-listed entities do not have independent directors accounting for at least one-third of their boards, while compliance on remuneration disclosure remains low.

A general view of the Singapore Exchange (SGX) building in Singapore. (Photo: AFP/Rahman Roslan)

SINGAPORE: More than one-third of independent directors have been on the boards of companies listed in Singapore for over nine years, while a small minority of listed firms here do not have independent directors making up at least one-third of their board seats. 

These were among the findings of a new report released on Wednesday (Oct 3) by the Singapore Institute of Directors (SID). Titled the 2018 Singapore Directorship Report, the biennial survey looks at the state of directorship and corporate governance by analysing 737 SGX-listed companies, business trusts and real estate investment trusts. 

Director independence was in the spotlight after Singapore Exchange (SGX) said in August that it would amend its listing rules following the issuance of a revised corporate governance code by the Monetary Authority of Singapore (MAS). 

The rule changes include limiting the tenure of an independent director to nine years through a two-tier shareholders' vote, and to have at least one-third of boards comprise independent directors. 

The report findings mean that these listed companies will have to take steps to either appoint new independent directors or put in place board renewal plans before these two rule tweaks take effect on Jan 1, 2022, SID said in a press release.

Based on an analysis of 2,356 independent directorships, the average tenure of independent directors here is 7.3 years. 

37 per cent, or more than one-third, of independent directors have been in their positions for more than nine years. 

The figure is even higher for companies that have been listed for nine years or more; 55.3 per cent, or 289 companies, have at least one independent director who has served on the board for more than nine years, the report said. 

Overall, SID said the percentage of firms with independent directors being the majority on their boards have been on an uptrend since the study was first released in 2014.  

Then, only 54.5 per cent of firms had 50 per cent or more independent directors on their boards. The percentage has since increased to 70.3 per cent in 2018. 

Still, 3.5 per cent of firms will have to catch up with the upcoming mandatory listing requirement of having independent directors make up one-third of board seats. The remaining 26 per cent have independent directors accounting for at least one-third but less than half of their board composition. 

“Ultimately, companies should realise that having more independent directors on board would stand them in good stead, not merely in the practice of good corporate governance, but also to bolster company performance,” said Nanyang Business School’s Associate Professor Victor Yeo, who is also a member of the Singapore Directorship Report Committee. 

He added that the revised nine-year cap for independent directors should be viewed as a means to ensure board independence, instead of a “constrain” that would affect companies’ ability to retain valuable long-serving directors. 

The biennial report also pointed out remuneration disclosure and gender diversity as areas that require improvements. 

Only 33.2 per cent of listed firms surveyed disclosed the remuneration of individual directors on their boards, down from 34.2 per cent in 2016. 

Across industries, companies in the financial (54.8 per cent) and real estate sectors (57.5 per cent) were relatively more forthcoming. Firms in other categories scored below the 50 per cent mark.  

Companies with bigger market capitalisation of S$1 billion and above were also more compliant, with 77.4 per cent disclosing their director salaries. By contrast, only 22.3 per cent of smaller companies with market capitalisation of less than S$300 million did so. 

More also needs to be done to improve diversity on Singapore’s boards, despite a slight increase from 2016. 

The report found out that mere 11.9 per cent of the 3,603 individual directors sitting on the boards of listed companies here are women, compared to 11 per cent two years ago. 

Across the different types of listed entities, REITs and business trusts showed significant improvement. The former had 16.1 per cent women on their boards in 2018, up from 13.8 per cent in 2016; the latter’s percentage rose from 5.8 per cent to 8.1 per cent over the same period. 

Despite that, gender bias continued to be most pronounced in business trusts (8.1 per cent), compared with companies (11.7 per cent) and REITs (16.1 per cent).  

Mr Ng Wai King, chair of the Singapore Directorship Report Committee, said: “While it is encouraging to note that the majority of areas, like board structure and composition, director tenure, meeting attendance and multiple directorships, have improved in terms of good corporate governance, companies should and could improve in areas pertaining to gender diversity and disclosure of remuneration.” 

Also on Wednesday, the SID launched the revised edition of the Corporate Governance Guides for Boards in Singapore, reflecting the revised corporate governance code and amendments in SGX listing rules.

Source: CNA/sk