SINGAPORE: The Constitutional Commission tasked to review the Elected Presidency has proposed stricter qualifying criteria for private sector candidates, in its report released to the public on Wednesday (Sep 7).
Currently, a person who has been chairman or chief executive officer of a company with a paid-up capital of at least S$100 million would qualify to stand in the Presidential election, provided other requirements are also satisfied.
But the Commission has recommended in its report that the threshold be changed from S$100 million in paid-up capital to S$500 million in shareholders’ equity.
In explaining the rationale for the change, the Commission noted that the current criteria was set more than 20 years ago, and Singapore’s commercial landscape that prevails today is “vastly different” from that of the early 1990s. “This underscores the need to update the qualifying criteria,” it said.
The Commission added that the President’s powers and responsibilities are far more complex than some assume them to be, and necessitate that the office be held by a person with “the requisite experience to discharge the President’s custodial role over the reserves”.
MORE COMPANIES WOULD QUALIFY
The scale of financial decisions the President may have to grapple with is exemplified by the approvals granted by the late Mr S R Nathan during his term as President in the wake of the 2008 Global Financial Crisis, noted the Commission. For example, in October 2008, Mr Nathan approved a S$150 billion guarantee on all bank deposits in Singapore, to be backed by Singapore’s reserves. In 1999, then-Senior Minister Lee Kuan Yew had given a S$150 billion figure as the size of the reserves.
In absolute terms, the Commission said more companies would meet the revised threshold of S$500 million than those which met the original S$100 million paid-up capital threshold just after the latter was first introduced.
It said that in 1993, approximately 158 Singapore-incorporated companies met the S$100 million paid-up capital criterion. By contrast, based on data from the Accounting and Corporate Regulatory Authority (ACRA) in March 2016, there were 691 Singapore-incorporated companies with shareholders’ equity at or exceeding S$500 million. But the Commission added that the actual number is likely to be larger than this, as about 80 per cent of Singapore-incorporated companies do not file their financial statements with ACRA.
The percentage of companies which would cross the threshold would also increase slightly, noted the report. In 1993, approximately 0.2 per cent of all companies met the S$100 million paid-up capital threshold. But as of March 2016, approximately 0.23 per cent of all Singapore-incorporated companies would qualify under the proposed S$500 million shareholders’ equity threshold.
In changing the indicator from paid-up capital to shareholders’ equity, the Commission said they consider shareholders’ equity a “better proxy for a company’s size and complexity” than paid-up capital. “Unlike paid-up capital, shareholders’ equity reflects the company’s current (and not just its historical) recorded worth,” said the report. “A company might have had substantial paid-up capital at its inception, but its reserves may have significantly depleted over time if its growth stagnated and liabilities accumulated.”
CANDIDATES WHO ARE IN "MOST SENIOR EXECUTIVE POSITIONS"
The Commission also proposed changes to qualifying corporate positions in a company. In particular, it recommended that the terms “Chairman” and “Chief Executive Officer” be replaced with a more general reference, such as “the most senior executive position of the company, however that office may be titled”. It explained that as it stands, “an individual would qualify so long as he has been the Chairman or CEO of a company that meets the requirements…regardless of the actual nature and scope of his work within that company”.
Some large companies may have non-executive chairmen who are not actively involved in running the company and who are consequently unlikely to possess the necessary expertise or experience, it added.
The new proposed reference would, said the Commission, be more appropriate as it would capture “those who might variously be titled as CEOs, Managing Directors or Executive Chairmen but would exclude, for instance, a non-executive Chairman who might have been invited to lead the board but who does not in fact actively run the company.”
The Commission also proposed imposing a “profitability requirement”, to require that candidates demonstrate the companies under their charge displayed an acceptable level of performance during the time they held office.
For example, it could be mandated that the company in question must have had a record of net profitability during the entire period that the applicant held the qualifying office. This means that the profits generated during this period should exceed any losses incurred.
Additionally, the company should not have gone into liquidation or entered into any other type of insolvency process within three years of the applicant ceasing to be the holder of the qualifying office, or by Nomination Day for the Presidential Election in question, whichever is earlier.
The Commission also proposed that the person must have held a qualifying office for at least six years, instead of the current three years.
2011 CANDIDATES - WHO WOULD QUALIFY?
If the proposed revisions had been in place for the 2011 Presidential election, two of the four candidates may not have qualified to stand.
Dr Tan Cheng Bock’s lengthy tenure as non-executive chairman of Chuan Hup Holdings would not have met the qualification criteria of being a senior official who actively runs the company.
Meanwhile, in explaining his eligibility in 2011, Tan Jee Say cited his experience as regional managing director of AIB Govett, which he noted at the time did not have paid-up capital of S$100 million, but managed assets in excess of that amount.
Neither Chuan Hup nor AIB Govett have S$500 million in shareholders' equity as well.