Most listed companies performed adequately when it comes to corporate governance, and the gap in the quality of disclosures between small and big companies is smaller than expected.
These are among key conclusions from a new study by the Singapore Exchange (SGX), which also highlighted that there is room for improvement, particularly on remuneration, assessing board performance and internal audits.
"We will be engaging with each company on areas where they can improve," SGX chief regulatory officer Tan Boon Gin said at a briefing yesterday.
The exercise is also aimed at giving investors "guidance in reading annual reports and asking questions at annual general meetings", he said.
"If there is no improvement, then they can expect some enforcement actions. It is a listing rule requirement for them to comply or explain under the Code of Corporate Governance.
"Corporate governance can have an impact on share prices."
The review, which was carried out by KPMG, examined annual reports for fiscal years that ended between July 1, 2014 and June 30, last year. It assessed if the reports gave meaningful disclosures on compliance and whether they explained non-compliance adequately. Companies scored an average 60 per cent out of 100, which KPMG described as "good with room for improvement".
The report showed that large-capitalisation companies with a market value of $1 billion or more scored an average 66 per cent while small-capitalisation companies averaged 59 per cent.
"Adherence to guidelines of the corporate governance code can be improved and deviations should be better explained," the SGX said.
Disclosures on remuneration matters were most in need of improvement, where the average score was 53 per cent.
The study found companies were poor at explaining how they align the level and mix of remuneration with long-term incentives and corporate and individual performance, with only 17 per cent of companies surveyed scoring 60 per cent and above. Companies were also reluctant to disclose details about how much they paid key personnel.
Board performance was another area with poor disclosure.
"Companies were also mostly silent on whether performance conditions were met for the board evaluation process. Only a third of companies did so," the SGX said.
Internal audit is another problem area. Nearly all companies indicated that an internal audit function exists, yet only 53 per cent disclosed the effectiveness of internal controls, the study found.
"If 95 per cent have disclosed an internal audit function has been established, why would they not be able to assess the effectiveness of internal controls?" asked Mr Irving Low, head of risk consulting at KPMG in Singapore.
Mr David Smith, head of corporate governance at Aberdeen Asset Management Asia, suggested that future studies could include data where investors can "track improvements in disclosure".
Compared with its peers, Singapore does very well on corporate governance disclosure, certainly within Asia, and punches above its weight on a global basis, Mr Smith noted.
"But there is still far too much boilerplate, generic disclosure.
"Statements from chairmen and CEOs can and should be more thoughtful, and more designed with shareholders (rather than lawyers) in mind," he said.
"There should be more reflective discussion of why certain governance structures are appropriate, and others that may be more common, are not.
"As it stands, there are far too many one-line statements on deviation from guidelines without much supporting narrative or evidence."