2016 - October
SID-ISCA Singapore Directorship Report 2016: More Boards have Greater Proportion of Independent Directors (IDs) and Increase in Lead IDs
18 Oct 2016 Category: Media Releases
-62% of firms have IDs forming at least half the board, a notable increase from 55% in 2014
- In Large-cap firms, 65% of IDs formed at least half the board. In mid-cap firms, that percentage increased by 15 percentage points to 61%
-30 % increase in the number of Lead IDs (396) as compared with 2014 (304); 15% of firms (nearly double of 9% in 2014) appoint a Lead ID even when they are not required to do so
Singapore, 18 October 2016 – A report on board directorship of Singapore-listed companies has found that more firms have a greater proportion of independent directors on their boards. The SID-ISCA Singapore Directorship Report 2016 was launched by the Singapore Institute of Directors (SID) and the Institute of Singapore Chartered Accountants (ISCA).
Now in its 2nd edition, the Singapore Directorship Report provides an in-depth analysis of 3,780 directors on the boards of 758 Companies, Business Trusts and REITs listed on the SGX as at 31 December 2015.
The report examines and provides trend analysis as compared against the first directorship report released in Nov 2014 on the structure of boards and their composition, directors’ tenure, remuneration, meeting attendance, gender diversity and multiple directorships. It also documents compliance with key aspects of the Singapore Code of Corporate Governance 2012 (the Code) with regards to relevant areas concerning directors.
Mr Adrian Chan, Deputy Chairman, SID Advocacy & Research Committee, added; “The Singapore Directorship Report continues to be the most definitive study on the state of directorships amongst listed companies in Singapore and it remains a landmark study in this area. This year, we have enlisted the help and support of the Accounting and Corporate Regulatory Authority of Singapore (ACRA) to share with us some information on the private limited companies that are registered with ACRA and their directors, which is information that complements the report’s findings. We have also expanded the scope of the report to include information on board committees (such as audit committees, nominating committees and remuneration committees) and meetings of the board and its committees.”
Mr Ho Tuck Chuen, Chairman, ISCA Corporate Governance Committee, commented, “The finding that firms are having a greater proportion of independent directors on their board is a positive trend. Independent directors can bring with them the benefits of providing an independent and objective view on their board, thus acting as a check and balance on the acts of the board and management of the company.”
According to the report, although the average board size of 6.6 directors has remained relatively stable since the first report in 2014, there seems to be a movement towards smaller boards, with the number of large boards with more than 8 directors reducing by 8% to 110 and the number of smaller boards with less than 6 directors increasing by a significant 28% to 239. The size of boards is very much positively related to market capitalisation as larger firms do tend to have larger boards.
Executive Chairs continue to dominate most of the board arrangements, with 54% of firms having them; although there has been a slight increase in the number of Independent Chairs since 2014, especially among Mid and Small-caps.
Another key finding is the trend of greater independence across boards. This can be seen by the increased proportion of independent director (ID) seats since the 2014 report, with boards having 49% (2014: 48%) ID seats and the percentage of non-ID seats decreasing from 53% to 51%. A total of 62% of firms have IDs forming at least half of the board, which is a notable increase from 55% in 2014. Large-cap firms have the highest percentage (65%) of IDs forming at least half of the board - although the increase in the Mid-cap category is particularly notable, a 15 percentage point jump to 61%.
Another sign of this trend of greater independence is the increase, from 54% to 68%, of the firms that appointed a Lead ID, as required by Guideline 3.3 of the Code. Overall, there has been a 30% increase in the number of Lead IDs (396) as compared with 2014 (304). Interestingly, 15% of firms appoint a Lead ID even when they are not required to do so, which is nearly a doubling of the 9% in 2014.
Conversely, alternate directorship is on the decline as the percentage of alternate directors has dropped to 5% as compared to 6% in 2014.
The median tenure of IDs across all firms is 5 years. 37% of IDs have been with their firms since listing. For firms which have been listed for more than 9 years, 64% of them have one or more long-tenured IDs who have served more than nine years. About 28% of IDs are long tenured.
On the topic of the disclosure of remuneration of individual directors on a named basis under Guideline 9.2 of the Code, the report revealed an overall compliance rate of only 34%. The Finance sector has the highest compliance rate and Mainboard-listed firms do better than Catalist-listed firms. Only 27% of firms complied with Guideline 9.2 regarding CEO remuneration disclosure on a named basis.
On the hotly debated topic of gender diversity, the percentage of women directors crept up from 10% to constitute 11% of the total pool of directors. The gender bias is not influenced by market capitalisation and is generally consistent across all size categories. Slightly more than half of all firms have no women on their boards and this is size dependent. Large-cap (42%) and Mid-cap firms (43%) have the smallest percentage of all male boards, as compared to Small-cap firms (57%). Large- and Mid-cap firms are leading the way in the gender diversity stakes as the proportion of all male boards for both segments have fallen the most drastically, by nearly 10 percentage points from 51% in 2014 to 42%.
Majority (82%) of directors hold only one director seat. However, a significantly higher percentage of ID seats filled in Small-caps (12%) are taken up by individuals who hold four or more other directorships as compared with Mid-caps (8%) and Large-caps (8%). For board seats which were filled from 2014 to 2015, 44% of them are directors with at least one other board seat. This suggests that firms have a strong tendency to look for directors with existing listed board experience when searching for IDs. There are actually five directors who chair four boards; nine directors who chair three boards and 42 directors who chair two boards.
A much smaller percentage of women directors hold multiple directorships compared with men. The highest number of director seats held by a woman is five (with four ID and one Non-Independent, Non-Executive Director seat), while the highest number of director seats held by a man is 10 (with nine ID and one Executive Director seat).
The attendance rate for the busier directors nevertheless remained better than those of directors holding just one board seat. It was found that most IDs are highly committed to attending board meetings, with 87% of IDs having an attendance rate of more than 75% of all board meetings held. The highest absenteeism rate is from Non-Independent, Non-Executive Directors, with 11% of them having attended 50% or less of all board meetings. In terms of audit, remuneration and nominating committee meetings, those in Large-caps met more often than the Small-caps. This is consistent with the resource-constraint theory where firms optimise the utilisation of their constrained resources, namely smaller firms faced larger human, time and financial resource constraints as compared to larger firms.
The Singapore Directorship Report 2016 is jointly produced by SID and ISCA. It is supported by ACRA and SGX and industry partners – Deloitte, Handshakes, NTU and NUS.
Singapore Institute of Directors
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Institute of Singapore Chartered Accountants
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About the Singapore Institute of Directors
The Singapore Institute of Directors (SID) is the national association of company directors.SID promotes the professional development of directors and corporate leaders. Formed in 1998, membership of SID comprises mainly directors and other professionals who work in the field of corporate governance.
SID has a comprehensive training curriculum that covers the spectrum of developmental needs of directors. SID provides thought leadership on corporate governance and directorship issues.
SID also provides other value-add services to its members including regular networking events and socials, a board appointment service, and a one-stop information service on governance related matters.
For more information, please visit 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. There are over 30,000 ISCA members making their stride in businesses across industries in Singapore and around the world.
Established in 1963, ISCA is an advocate of 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.
ISCA is the Administrator of the Singapore QP and the Designated Entity to confer the Chartered Accountant of Singapore - CA (Singapore) - designation.
ISCA is an Associate of Chartered Accountants Worldwide – supporting, developing and promoting over 620,000 Chartered Accountants in more than 200 countries around the world.
For more information, visit www.isca.org.sg.