SINGAPORE: The Singapore Exchange (SGX) will amend its listing rules after the central bank issued on Monday (Aug 6) a revised corporate governance code that aims to encourage board renewal and strengthen director independence.
The Code of Corporate Governance was revised after the Monetary Authority of Singapore (MAS) accepted a slew of recommendations by the Corporate Governance Council.
The changes include strengthening director independence by reducing their shareholding threshold from 10 per cent to 5 per cent, and limiting the tenure for independent directors to nine years through a two-tier shareholders' vote.
To enhance board diversity, at least one-third of the board should be made up of independent directors – unless the chairman is not independent, in which case the majority should comprise of independent directors. Otherwise, the majority of the board should comprise of non-executive directors.
Companies must also disclose their board diversity policy and the progress made, MAS said.
The amendments to SGX's listing rules will take effect on Jan 1 next year, except for the rules on the nine-year tenure for independent directors and the requirement for independent directors to comprise one-third of the board. These two rules will take effect on Jan 1, 2022.
"The longer transition period accords companies sufficient time to ensure the composition of their boards is able to meet the requirements of the listing rules," SGX said.
The Code of Corporate Governance is applicable to listed companies in Singapore on a comply-or-explain basis. It requires companies to adhere to the principles of the code and provide explanations for variations from its provisions or guidelines in their annual reports.
Mr Ong Chong Tee, MAS deputy managing director for financial supervision, said: “The revised code is more concise and less prescriptive, and is designed to encourage more thoughtful application. It will help spur better corporate governance practices among companies to sustain long-term business performance."
CORPORATE GOVERNANCE ADVISORY COMMITTEE
In line with the council’s recommendations, MAS said it will also establish an independent Corporate Governance Advisory Committee to advocate good corporate governance practices.
The committee will monitor companies’ implementation of the code, and provide support to companies by promulgating good practices and areas for improvement. It will also advise regulators on corporate governance issues.
The committee will comprise senior practitioners with experience as board chairmen or directors, corporate governance experts and representatives from diverse stakeholder groups. MAS expects to establish the committee by the end of this year.
The Code of Corporate Governance was first issued by the Corporate Governance Committee on May 2, 2002. The code was subsequently revised on Jul 14, 2005, and again on May 2, 2018.