Noble Group's audit committee comes under fire from proxy advisory services firm

The committee does not follow local best practices.

An influential proxy advisory services firm has called for an overhaul of Noble Group’s audit committee, hot on the heels of three damaging reports released by Iceberg Research.

Institutional Shareholder Services (ISS) stated in a report obtained by SBR that the composition of Noble’s audit committee does not comply with the requirements of Singapore Code of Corporate Governance.

In particular, Richard Elman, the group's founder, executive chairman and major shareholder, serves as a member of the audit committee in violation of the recommendations under the code.

"While Elman's interest may be aligned with those of shareholders', and his knowledge and expertise may be valuable in carrying out the duties of these committees, it is preferable that members of key board committees –namely the audit, remuneration and nominating committees – be limited to non-executive directors only, as the presence of an executive, especially the founder and major shareholder, on these committees threatens to undermine the committees' ability to provide independent oversight," ISS noted.

In its annual report, Noble countered that Elman is a member of the audit committee because of "his extensive knowledge of the operations and history of the Group, and the benefits he is able to bring to discussions and deliberations on a wide range of topics considered by the Committee”.

Another director, Iain Ferguson Bruce, serves as a director of six public companies and chairs a number of audit committees.

“It is not common in this market for a director to serve on more than six public boards. While the demands of each board and the capacity of each person will vary, holding the equivalent of seven directorships with publicly listed companies and chairing multiple audit committees may make it challenging for this director to devote adequate time to the affairs of each company,” ISS stated. 

“In light of the allegations made by Iceberg, it is imperative that the company's audit committee be comprised entirely of non-executive directors, chaired by a director who is not overcommitted so as to help restore investor confidence in the company's auditing and financial reporting practices,” the report reiterated.