Corporate governance disclosures by listed firms good, but room for improvement : SGX

SINGAPORE - A review of 545 mainboard listed firms' corporate governance (CG) code disclosures found that the state of disclosures was good, with room for improvement, according to a study by the Singapore Exchange.

While the companies reviewed for their disclosures scored an average 60 per cent, adherence to guidelines of the CG code can be improved, and deviations should be better explained, SGX said.

Disclosures on "remuneration matters" were most in need of improvement, it added.

The review, which was carried out by KPMG, showed that disclosures across three of the four pillars of the CG code, namely, "board matters", "accountability and audit" and "shareholder rights and responsibilities" had average scores ranging from 61 per cent to 63 per cent.

The "remuneration matters" pillar had an average score of 53 per cent, the lowest among the pillars. Many companies were reticent about the amount of remuneration paid to directors, chief executives and key management personnel. Also lacking were details on the performance metrics for directors and key management personnel and how performance and remuneration are aligned.

Annual reports of companies for financial years ending from July 1 2014 to June 30, 2015 were reviewed.

The review showed that large-capitalisation companies had a slight lead over other firms in terms of scores achieved. Large-capitalisation companies with market value of S$1 billion or more, scored an average 66 per cent. Mid-cap companies, or those with market value exceeding S$300 million but less than S$1 billion, scored 62 per cent on average. Small-cap companies had an average score of 59 per cent.

The highest score achieved by a company in the study was 90 per cent, while the lowest was 28 per cent. The study found 52 per cent of companies, or 281, scored above 60 per cent; 35 per cent of companies, or 189, scored between 50-60 per cent; and 14 per cent of companies, or 75, scored below 50 per cent.

SGX intends to use the results of the study and findings on individual companies to help improve their disclosures and overall governance standards.

"This report is aimed at making companies aware of the importance of complying with the CG code and providing meaningful explanations for deviations. We want to work with companies to improve the quality of their disclosures and governance practices so that they in turn can draw more long-term investors," said Mr Tan Boon Gin, chief regulatory officer, SGX.

"The intent of our engagement is to make clear to the companies the purpose of each of the relevant requirements and why improvements are important. We also want to hear about the constraints which some companies, particularly the smaller ones, may face and how we can help," Mr Tan added.

"This disclosure study will serve as a guiding post in helping listed companies become better corporate citizens," said Mr Irving Low, head of risk consulting at KPMG in Singapore.

Disclosures on 85 requirements were evaluated based on whether the disclosure was present, which would account for one-third of the score, and the quality of the disclosure if present, which would carry two-thirds of the score.