In a release yesterday, Singapore's Monetary Authority announced the appointment of a Corporate Governance Council to review, revise and augment existing corporate governance rules. Of particular concern is the low number of truly independent directors on the boards of companies in Singapore.
Among the proposed changes are:
1. Independence: That at least one half of the directors should be independent, particularly in those companies where the CEO and Chairman roles are filled by the same person or where founding family members hold several key positions. Serving as an executive officer or being a substantial shareholder of the listed company during the preceding 3 years would render a director not independent, as would other close relationships between a director and such persons. Serving on a board for more than 9 years also means that a director lacks independence.
2. Training: Companies should arrange for and pay for training of directors and should report on this in their annual reports. The nominating committee of the board should oversee this.
3. Director performance: The nominating committe should also monitor performance by individual directors by looking at whether the director devotes sufficient time to performance of board duties. The nominating committee should also determine the maximum number of directorships that may be held and report this to shareholders.
4. Compensation: The remuneration committee should assure that the remuneration consultants are objective. More information should be disclosed to shareholders regarding the pay/performance link and aggregate compensation of the top five (other than directors and the CEO) must be disclosed. Mexico has a similar approach to compensation disclosures, allowing for aggregated rather than individualized disclosure of compensation amounts.
5. Financial disclosures: The board should assure that there are appropriate internal controls and risk assessment procedures and should comment on whether it has received assurances from the CEO and CFO about the accuracy of financial statements and the existance of these controls and procedures.
6. Sharehold relations: Companies should comply with a new statement on shareholder rights, should put all resolutions to a shareholder vote and should announce detailed results of the voting.
Singapore has for many years tried to position itself as having strong and transparent capital markets and these changes should solidify that position. The proposed changes will be open to comment from interested parties until the end of July.