SID and ISCA Report Provides Timely Insights on Directors and Boards in Singapore

• Inaugural Singapore Directorship report covers over 3,600 directors sitting on boards of SGX-listed entities,
• Research provides deep insights into the state of directorships

Singapore, 4 November 2014 – The Singapore Institute of Directors (SID) and the Institute of Singapore Chartered Accountants (ISCA) have jointly conducted a comprehensive study on the state of board directorships in Singapore. The report provides an in-depth analysis of 3,670 directors on the boards of 717 companies, business trusts and REITs listed on the Singapore Exchange (SGX) as at the end of 2013. 

The research project is supported by Singapore Exchange, and was conducted in partnership with local analytics start-up Handshakes, Nanyang Business School, NUS Business School and Deloitte.

The report examines the structure of boards and their composition, director tenure, remuneration, meeting attendance, gender diversity and multiple directorships, and provides answers to questions that are frequently asked regarding directorships. It also documents elements of compliance with key aspects of the Singapore Code of Corporate Governance 2012 (the Code).

Mr Willie Cheng, Chairman of SID, said “This report is the most definitive study on the state of directorships on listed companies in Singapore to date. The findings have thrown up a few surprises while confirming other widely-held beliefs. Importantly, the data can be further mined to help formulate governance recommendations backed by concrete facts and statistics. ”

Mr R. Dhinakaran, ISCA Vice-President and Chairman of the ISCA Corporate Governance Committee, commented, “Given intensifying stakeholder scrutiny on corporations, the study provides a timely overview of the current state of directorship, as well as areas that can be further looked at to enhance corporate governance.”

Several key findings from the report are highlighted here. The first is the strong element of independence on listed boards.  About 97% of all boards comply with the requirement to have Independent Directors (IDs) making up one-third of their composition, with more than half (54.5%) already having IDs comprise at least half of their board, even though the Code requirement for this does not come into effect until 2016. IDs generally show diligence, with 85.5% of IDs attending more than three-quarters of all board meetings held.

The second key finding is that certain entities seem to have higher compliance standards in a number of areas. Singapore-incorporated firms score much better than their foreign-incorporated counterparts in having more independent chairmen (21% versus 2.9%), having more ID seats (48.6% versus 39.7%) and a higher level of separation of the board chairman and the CEO (70.8% versus 59.2%).

Larger capitalised firms score better than mid and small cap firms in the separation of the chairman and the CEO (82% versus 72.4% and 65.9%), the proportion of IDs on the board (62% of large cap firms have at least half of their boards seats taken by IDs versus 45.5% for mid cap and 55% for small cap firms), and the level of education of their IDs (42% of IDs in large cap firms have post-graduate education compared to 38% overall). The results also show that IDs are paid more in large cap firms than their counterparts in small cap firms, with the size of director remuneration appearing to be positively correlated to the size of the firm.

Temasek-linked firms (TLCs) score better than non-Temasek linked firms in having a higher proportion of IDs (with 82.1% of TLCs having at least half of their boards comprising IDs, compared to 52.1% for non-TLCs), although directors on the boards of TLCs tend to hold more directorships (38.7% having multiple directorships) than non-TLC boards (with only 18% holding multiple directorships).

The third key finding is that multiple directorships do not appear to be a major problem as is commonly perceived. More than 82% of all directors only sit on one board, and merely 12.3% of IDs sit on more than two boards. This shows that there is a significant breadth in the pool of IDs. The highest number of ID seats held by an ID has come down from 12 seats a few years ago to nine seats, with two IDs holding that number. Moreover, directors with multiple directorships exhibit a better attendance record at board meetings than those directors holding only one board seat, with over 90% of them attending more than three-quarters of all board meetings compared to 81.4% of single-seat directors. This suggests that directors with multiple directorships take the effort to dedicate sufficient time and attention to their directorships. On top of this, directors with multiple directorships have higher educational qualifications than single seat directors, with 75% of directors with multiple directorships holding at least a bachelor’s degree, compared to only 65.9% for single-seat directors. Looking at industry sectors, it is seen that the finance industry has the highest proportion of directors with multiple directorships.

The fourth key finding shows that the lack of independent chairmen on boards, disclosure of precise remuneration for directors, and gender diversity remain some of the more prominent corporate governance gaps which could or should be improved. Although the Code recommends that boards have IDs as their chairmen, only 18.4% have independent chairs, with nearly a third still having chairmen cum CEOs. A good 57% of firms have an executive director as the chairman of the board.  Further, less than a third (31%) of entities discloses the precise remuneration of their directors, when the Code now demands it.  Finally, men occupy more than 90% of all board seats (91.7%) and more than half of all boards (56.1%) do not have any women. Of note, only 5.9% of ID seats are held by women.

The survey results were shared and discussed with an audience of over 130 directors and senior executives at an event held by SID and ISCA. 

Conclusion

It is hoped that the report, with its rich data and analysis, will contribute to the corporate governance debate and facilitate efforts in future decision-making and policy to enhance corporate governance in Singapore.  SID and ISCA hope to produce updates to this report every two years. 

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About the Singapore Institute of Directors

The Singapore Institute of Directors (SID) is the national association of company directors. Since its formation in 1998, SID has to play a crucial role in the advocacy and development of good corporate governance practices and as a hub for the professional training and education of directors.

SID conducts a series of training programmes for the development of its members and to increase the pool of individuals qualified to serve as directors in listed companies. SID’s foundational courses include the Effective Board Leadership Programme, Listed Company Director Programme and SID-SMU Directorship Certification Programme. In addition, the Institute holds regular seminars and forums on a range of subjects relevant to directors. Its flagship event, the annual SID Directors’ Conference, features renowned international and local speakers on trends and issues impacting directors and governance.

The Institute also works closely with the authorities and regulators, its network of members and professionals by providing thought leadership on corporate governance and directorship issues in Singapore. It played a key role in the formation of the Code of Corporate Governance in 2001 and the revised 2012 Code.

To encourage best board practices, SID launched the Singapore Best Managed Board Award and later the Best CEO Award, which are now presented at the annual Singapore Corporate Awards that SID is co-organising with the Business Times and the Institute of Singapore Chartered Accountants.

Apart from The Directors’ Bulletin which it publishes quarterly to keep directors abreast of current issues, SID also issues Statements of Good Practice, thought leadership articles and other research papers.

More information about SID can be found at www.sid.org.sg

About the Institute of Singapore Chartered Accountants

The Institute of Singapore Chartered Accountants (ISCA) is the national accountancy body of Singapore. ISCA’s vision is to be a globally recognised professional accountancy body, bringing value to our members, the profession and wider community.  Established in 1963, ISCA shapes the regional accountancy landscape through advocating the interests of the profession.

Possessing a Global Mindset, with Asian Insights, ISCA leverages its regional expertise, knowledge, and networks with diverse stakeholders to contribute towards Singapore’s transformation into a global accountancy hub. Our stakeholders include government and industry bodies, employers, educators, and the public.

ISCA is the Administrator of the Singapore Qualification Programme (Singapore QP) and the Designated Entity to confer the Chartered Accountant of Singapore - CA (Singapore) - designation. It aims to raise the international profile of the Singapore QP, a post-university professional accountancy qualification programme and promote it as the educational pathway of choice for professional accountants seeking to achieve the CA (Singapore) designation, a prestigious title that is expected to attain global recognition and portability.  There are about 28,000 ISCA members making their stride in businesses across industries in Singapore and around the world.

For more information, please visit www.isca.org.sg