Are We Ready? Associate Professor Lawrence Loh Director Centre - PowerPoint PPT Presentation

The New Corporate Governance Landscape – Are We Ready? Associate Professor Lawrence Loh Director Centre for Governance, Institutions and Organisations NUS Business School 7 August 2019 Findings of the Singapore Governance and Transparency Index 2019 Presented at the Singapore Governance and Transparency Forum

SGTI Partnership A Collaboration Between Strategic Media Partner 2

SGTI Advisory Panel Ms Rachel Eng Managing Director, Eng and Co LLC Mr Loh Hoon Sun Senior Advisor, Phillip Securities Pte Ltd Mr Low Weng Keong Past Global President & Chairman of the Board, CPA Australia Mr Chaly Mah Chairman (Retired), Deloitte Singapore Chairman, Singapore Accountancy Commission Mr Wong Wei Kong Editor, The Business Times 3

Corporate Governance Milestones Revised Code of SGTI extended to Code 2018 Corporate Governance REITs and comes into (2 nd review) business trusts effect in 2019 2009 2012 2016 2017 2018 2019 Governance & SGTI Introduced Revised Code of Transparency Index Corporate Governance (GTI) launched (3 rd review) 4

SGTI Assessment Coverage General Category (578) REITs & Business Trusts (46) Excluding 123 companies: Excluding 1 REITs & business trusts: • • 14 newly listed 1 newly listed • 30 secondary listings • 8 funds • 60 suspended from trading • 1 not released report for 2 years • 10 delisted 5

SGTI Framework – General Category B.R.E.A.D Base Score (100 points) B oard Responsibilities (35 points) R ights of Shareholders (20 points) E ngagement of Stakeholders (10 points) A ccountability & Audit (10 points) D isclosure & Transparency (25 points) + Adjustments for Bonus & Penalty (43 points) = Overall SGTI Score (143 points) 6

Mean Score Trend – General Category 56.3 59.3 52.3 49.7 47.6 42.1 38.0 34.9 33.9 33.5 31.5 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 7

Company Score Distribution 160 140 Number of Companies 120 100 80 60 40 20 0 -20 -10 0 10 20 30 40 50 60 70 80 90 100 110 120 130 140 -20 Company Score 2017 2018 2019 8

Sectional Scores B.R.E.A.D Score by Percentage 76% 74% 72% 71% 69% 64% 58% 58% 57% 56% 53% 53% 53% 38% 30% Board Rights of Engagement of Accountability & Disclosure & Accountability Responsibilities Shareholders Stakeholders Audit Transparency & Audit 2017 2018 2019 9

Key Findings – General Category B oard Responsibilities Board & Director Appraisals R ights of Shareholders Shareholders’ Information & Participation E ngagement of Stakeholders Sustainable Policies & Practices A ccountability & Audit Committee Composition & Internal Controls D isclosure & Transparency Director Tenure 10

Board Responsibilities: Board & Director Appraisals 89% 87% 87% 81% 77% 70% 55% 49% 35% Disclose Process For Board Disclose Criteria For Board Disclose Criteria For Individual Appraisal Appraisal Director Appraisal 2017 2018 2019 11

Rights of Shareholders: Shareholders’ Information & Participation 92% 88% 84% 79% 64% 63% 62% 60% 55% All Directors Subject to Shareholders Approve Disclose Related Party Transactions All Directors Subject to Re-Election at Shareholders Approve Non-Executive Re-Election at Least Once Every Non-Executive Directors Are Fair and at Arms' Length Least Once Every Three Years Directors Remuneration Three Years Remuneration 2017 2018 2019 12

Engagement of Stakeholders: Sustainable Policies & Practices 70% 70% 55% 43% 42% 37% 36% 33% 33% 25% 21% 17% Efforts to Address Disclose Health, Safety Efforts to Interact With Efforts to Ensure Customers' Health and and Welfare Policy For the Communities Environmentally Friendly Safety Employees Value Chain 2017 2018 2019 13

Accountability & Audit: Committee Composition & Internal Controls 95% 95% 92% 66% 65% 62% 53% 49% 39% 30% 30% 29% All Audit Committee All Audit Committee Internal Audit Meets Assurance From CEO & Members Are Independent Members Are Non- Institute of Internal CFO Regarding Effectiveness of Company’s Executive With Independent Auditors Standard Chairman Risk Management & Internal Control 2017 2018 2019 14

Disclosure: Director Tenure 76% 76% 61% 32% 29% 25% Disclosure of All Directorships Held at Present and More Than One Independent Directors Serving More Over the Past Three Years Than Nine Years 2017 2018 2019 15

SGTI Framework – REITs & Business Trusts Normalized Base Score (75 points) Trust-Specific Items (25 points) (B.R.E.A.D) (S.L.I.C.E) B oard Responsibilities S tructure R ights of Shareholders L everage E ngagement of Stakeholders I nterested Person Transactions A ccountability & Audit C ompetency of Trust Manager D isclosure & Transparency E moluments + Adjustments for Bonus & Penalty (43 points) = Overall SGTI Score (143 points) 16

Mean Score Trend - REITs & Business Trusts 78.6 74.5 60.4 2017 2018 2019 17

Key Findings – REITs & Business Trusts S tructure Choice (2%) & Removal of Trust Manager (35%) L everage Gearing Policy (83%) & Credit Rating (35%) I nterested Person Transactions Reviews Significant IPTs (76%) C ompetency of Trust Manager CEO & Director Experience (37%) E moluments Disclose Base Fees (96%) 18

SGTI 2019 - Looking Forward Board Structures Corporate Practices 19

Board Independence 80% 69% 70% Number of Companies (%) 60% 50% 40% 30% 24% 20% 6% 10% 0% 0% 0 - 24% 25 - 49% 50 - 74% 75 - 100% Percentage of Independent Directors 20

Chairman and Director Independence 99.1% 98.7% 39% 33% 25% 23% Board With At Least One-Third Chairman an Independent Majority Are Independent Independent Directors Director Directors When Chairman Is Non- Independent Director 2018 2019 21

Independent Directors Serving More Than Nine Years 32% 12% 1% More Than One More Than Two More Than Three 22

Business Integrity 52% 51% 50% 22% 20% 18% Disclose Code of Ethics Describe Company's Anti- Whistle-Blowing Policy With Corruption Programmes and Anonymous Reporting Procedures 2018 2019 23

Investor Relations 87% 78% 71% 69% 46% 45% Dedicated Investor Relations Group Corporate Structure Vision and Mission Statement Link Disclosed on Website 2018 2019 24

Validation: SGTI Ranks & Scores Shown on SGX Website Source: Singapore Exchange (SGX) 25

Validation: SGTI Data Used by MAS Financial Stability Review Source: Financial Stability Review, Macroprudential Surveillance Department, Monetary Authority of Singapore (MAS), November 2018 26

Summary 1. SGTI 2019 reached all-time high scores of 59.3 (General Category) and 78.6 (REITs and Business Trusts) 2. Engagement of stakeholders notably rose to a score of 53% from last year’s 38%. More companies adopted sustainable policies and practices. 3. However, there are areas of concerns: • Only 39% had IDs as majority on boards when chairman is non-ID • One-third (32%) had more than one IDs serving more than nine years • One-fifth (20%) disclosed code of ethics • Only 50% described company’s anti -corruption programmes and procedures • Some 52% adopted whistle-blowing policy with anonymous reporting 27

Summary Looking forward for new corporate governance landscape: • The foundation of board structures in place • The pillar of IDs requires attention • The practices in business integrity need improvements 28