Singapore firms' leadership boosted by board and audit upgrades

Singtel topped the rankings on governance and transparency for the fourth year.

Singtel topped 589 listed companies in the annual Singapore Governance and Transparency Index (GSTI) ranking in the General Category for the fourth consecutive year, whilst CapitaLand Mall Trust led 43 REITs in the REIT and Business Trust Category for the second year.

The SGTI assesses companies on their corporate governance disclosure and practices, as well as the timeliness, accessibility and transparency of their financial results announcements.

Singtel retained its pole position with 129 points for SGTI 2018, whilst DBS ranked a close second at 124 points. CapitaLand and Singapore Exchange (SGX) tied at the third position. UOB made it to the top 10 at eighth place for the first time, whilst Singapore Press Holdings (SPH) placed ninth.

The SGTI 2018 scores constitute base scores, bonuses and penalties awarded in accordance with corporate governance disclosure performances. Overall, the average score for companies in the General Category is 56.3, an increase of 4.0 from 2017 where the mean scores have improved consistently from 31.5 in 2011.

In addition, a 13.2% increment of mean bonuses awarded is observed at 7.7 from 6.8 in 2017. However, there was also an increase in SGTI penalties awarded this year. The penalty scores went up by 1.2 points to 10.2 this year, from an average of 9.0 in 2017.

“Penalty items reflect issues that are indicative of poor corporate governance,” SGTI said. “They are assigned on a company-specific basis and are usually event-triggered.”

For the REIT and Business Trust Category, the higher average score of 74.5 from 60.4 in 2017 reflected more individuals who have experience in REIT managing these companies. This is demonstrated by at least 70% of listed companies that provided detailed profiles of CEOs and directors of a REIT manager with a minimum of 10 years of relevant experience and five years at a management level.

Furthermore, 77% of the companies also had a REIT manager with at least three full-time representatives each having at least five years of experience relevant to REIT management.

The SGTI also observed improvement in areas of stakeholder engagement, better processes in board selection, and the standards of internal auditors.

Stakeholder engagement scores for listed companies improved to 3.8 in 2018 from 3.0 in 2017. 36% of companies disclosed the health, safety and welfare policy for its employees in 2018, an improvement from 24.6% in 2017

There has also been an improvement in the number of companies disclosing their code of conduct or ethics of the company. About 17.7% of companies did this in 2018 as opposed to 12.9% in 2017.

There were also better board processes in director selection and appointments. About 64.5% of companies disclosed board diversity policy compared to 33.7% in 2017 and 22.8% had independent chairmanships, an increase from 19.6% in 2017.

A whopping 89% of the companies revealed the provision of orientation programmes for new directors/commissioners, a vast improvement from 77.1% of companies in 2017.

“To keep the board composition fresh, more companies have also adopted the practice of director re-election once every three years to allow shareholders to vote for director appointments regularly,” SGTI added. The number of participating companies has risen from 78.5% to 84.4% in 2018.

Almost half (48.6%) of the companies’ internal auditors can now meet the Institute of Internal Auditors (IIA) standard as opposed to 39.1% in 2017. A majority (66.9%) of the companies either disclose the head of internal audit or the name of their audit firm if it is outsourced. This is a fair improvement from 64.9% in 2017.

“With the latest changes to Listing Rules and Code of Corporate Governance, the bar is being raised, and we believe companies will embrace the tenets of good governance, including accountability, transparency, and sustainability,” commented and Singapore Institute of Directors (SID) chairman Willie Cheng.

Despite overall development, companies still have a long way to go. Only 9.7% of companies performed consultancy for a directors’ remuneration, a decline from 17.7% in 2017. Only a slight 25.1% disclosed their CEO’s exact remuneration.

These modest results suggest companies require time to enforce remuneration disclosures in adherence to the new corporate governance standards, SGTI said.

In the areas of investor relations and board director training disclosures, only 61.3% of companies published their investor relations contact details on their website or annual report. This is a drop of 6.7% compared to 68% in 2017. Similarly, only 19.4% revealed the information on director training in 2018, down from 23.6% in 2017.

The SGTI is a joint initiative of CPA Australia, NUS Business School’s Centre for Governance, Institutions and Organisations (CGIO), and SID.