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Singapore listed firms need to step up their pace of adhering to the country’s Code of Corporate Governance.
If the current rate of progress is anything to go by, these local firms will take until 2020 to comply fully with board independence guidelines, even though they are required to be aligned to the Code by the end of their 2017 financial year.
That was the latest finding from this year’s Governance and Transparency Index (GTI), which highlighted only 268 firms (41.6%) have complied with the recommendations under the Code to date.
The annual GTI, jointly published by CPA Australia and NUS Business School’s Centre for Governance, Institutions and Organisations (CGIO), examined a total of 644 Singapore-listed companies which released their 2013 annual reports before 31 May 2014.
The Code, which was revised in 2012, requires listed firms to appoint an independent chairman or have independent directors make up at least half the board in instances where the chairman is not an independent director.
According to the GTI, more than half of the companies examined (376) have yet to meet this requirement. The index also highlighted that listed firms have been slow in disclosing their executive directors’ exact remuneration, especially those of their CEOs.
While the number of firms disclosing the exact pay package of their CEOs increased to 19.3% from 7.8% a year ago, there remained a large majority which stated they have not done so. Confidentiality, talent-poaching and competition were cited as the main reasons for not disclosing such information.
“The GTI 2014 results demonstrate that while Singapore’s listed companies have made good progress, we are actually still quite far from compliance to the Code,” Lawrence Loh, associate professor, and project leader of the GTI project at NUS Business School’s CGIO, said.
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“Notably, our projections based on GTI 2014 suggest that a quantum leap is needed in several critical areas, particularly in board independence. A clear encouragement is definitely necessary for these companies to comply with the requirements of the Code. It is critical now to go a step further to see how well we are geared for the revised Code.”
The latest analysis also found much room for improvement in other areas highlighted in the Code.
“Only 14.8% of companies voted by poll and subsequently disclosed the voting results,” the report stated. “In addition, the study found that the number of independent directors (IDs) who have served for more than nine years increased from 37.2% last year to 37.8% in GTI 2014, even though the Code recommends that the independence of any director who has served beyond nine years be subject to rigorous review.”
It added a total of 243 companies are now required to re-assess the independence of their 469 long-serving IDs.