Singapore Institute of Directors

EMBARGOED UNTIL 10.00AM ON 11 NOVEMBER

Singapore, 11 November 2022 – The Singapore Institute of Directors (SID) and Singapore Exchange (SGX), in partnership with PwC Singapore (PwC), Russell Reynolds Associates (RRA) and the Singapore University of Social Sciences (SUSS), launched the findings of the 2022 Singapore Board of Directors Survey today. The report provides a snapshot of corporate governance practices by boards of listed companies in Singapore.

“Now in its 12th edition, the survey provides insights into corporate board structures and board practices in Singapore. This year’s survey was repositioned to take into account the ongoing developments in the corporate governance environment, and to ascertain how boards are responding to these regulatory changes,” said Ng Wai King, Chairman of the Board of Directors Survey 2022 and SID Governing Council member.

For example, the survey seeks to capture:

• How companies have addressed issues such as the tenure of independent directors, board diversity and reporting frameworks for sustainability reports in the light of the revised Code of Corporate Governance and the SGX Listing Rules.
• How companies are complying with evolving guidance on the holding of Annual General Meetings (arising from changing Covid-related restrictions).

“The findings of 12th Singapore Board of Directors survey provide further impetus to Singapore Exchange Regulation to push forward with our initiatives to increase board diversity and renewal. We intend to limit the tenure of long-serving independent directors, for example. This will strengthen the independence of boards. Ultimately, accountability will increase and standards will be raised,” said June Sim, Head of Listing Compliance, SGX RegCo.

“The ever-changing global environment has led to increasing expectations towards listed entities in raising their governance standards. While the small cap segment has continually enhanced their understanding of and response to corporate governance mandates, there is room for improvement,” noted David Toh, Governance, Risk and Controls Leader, PwC Singapore.

“There’s never a bad time for these companies to consider augmenting their current effort, and dovetailed with external advice on governance, risk and compliance matters, they can ensure their corporate governance endeavours remain robust. As the small cap segment represents 73% of the market, collective progress and development can leave a positive impact on the market,” he added.

Conducted between May and July 2022, the survey received 150 responses, equivalent to a response rate of 23 per cent. The participants represent a mix of companies, over a range of size (small, medium and large capitalisation) and industry type (sectors). From the respondent pool, 61 per cent are listed on the SGX Mainboard, 31 per cent are Catalist firms and 8 per cent are Real Estate Investment Trusts and Business Trusts.

KEY FINDINGS

 Long serving directors

• More than a third (35%) of respondents indicate they had independent directors (IDs) who have served more than nine years on their board, down from 43% in 2019.
• Small cap firms were over-represented in this aspect, with 41% reporting the presence of long-tenured directors who have served more than nine years, compared to 17% of large cap firms.
• The most common measure that companies plan to take regarding their IDs with tenure exceeding nine years is to put these directors up for shareholders’ vote at their annual general meetings in 2022. Two-thirds (67%) of survey respondents say they will opt for the two-tier vote; 29% plan to appoint other directors to replace those long-serving IDs; and 6% say they will re-designate those long-serving IDs as non-independent and expand their board size.

Board diversity

• A majority of respondent firms (78% in 2022 vs 53% in 2019) report having a board diversity policy.[1] Of the remaining 22% of respondents who do not have a board diversity policy, all are small cap firms – equivalent to one third of all small cap respondent firms.
• More than half (53%) of respondents intend to increase the diversity of their boards, while 24% have no intention of doing so. The remaining 23% of respondent firms are unsure.
• The percentage of respondent firms that report having no female directors has steadily declined over the years. Nonetheless, over a third (34%) of respondents have all-male boards. This compares to 39% in 2019, 45% in 2017 and 53% in 2015. Corresponding, the percentage of respondents with two or more female directors has doubled over the last 7 years, increasing to 32% in 2022 from 23% in 2019, 17% in 2017 and 15% in 2015.

Board succession

• The majority of firms (96%) indicate the use of personal networks as the most common means for identifying potential non-executive directors. Inviting nominations by the parent company of controlling shareholder is the second most common method (45%), followed by the use of executive search firms (27%).

Strategic planning

• Less than half (44%) of respondent firms indicate that they have dedicated at least one board session to strategy in the past year, up from 37% in 2019. Among the firms that have a dedicated strategy meeting, large cap firms (59%) and mid cap firms (55%) are more likely than small cap firms (38%) to do so.

Remuneration disclosures

• Just over half (53%) of the respondent firms report providing full disclosures of the detailed remuneration of each individual director and CEO on a named basis. While this marks the first time the 50% threshold has been crossed, there is strong resistance across the board to greater disclosures on compensation of board members and the CEO.

Sustainability reporting

• Almost all the companies are reporting on sustainability, although much of this reporting has yet to translate to tangible action – only 54% of respondents actually have sustainability-related key performance indicators (KPIs) in place. Less than half among these companies have tied KPIs to compensation and reward, and they are mainly the large cap companies.
• Only 41% of respondents subject their sustainability reporting process to internal review by internal audit. And just 20.4% (30 respondent firms) report that they conducted independent external assurance on their sustainability reports.
• There is a growing trend (15%) of dedicated board-level sustainability committees being formed, though the bulk of the respondents (73%) indicate that this oversight responsibility still resides with the board as a whole.

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For further information, please contact:

Yang Wai Wai

Head, Communications and Research

Singapore Institute of Directors

Email: waiwai.yang@sid.org.sg

Tel: 6011 0102, HP: 9797 9660

[1] With effect from 1 January 2022, Mainboard/Catalist Rule 710A(1) of the SGX Listing Rules require issuers to maintain a board diversity policy. The rules take reference from the elements of Provision 2.4 of the Code of Corporate Governance, which states that a board diversity policy must address gender, skills and experience, and any other relevant aspects of diversity.