Quick takes: Proposed changes to Corporate Governance Code in line with other developed jurisdictions

The SGX centre along Shenton Way.
The SGX centre along Shenton Way. PHOTO: ST FILE

SINGAPORE - The Corporate Governance Council on Tuesday (Jan 16) suggested a slew of changes to the Code to encourage board renewal and diversity as well as strengthen director independence.

Among the key recommendations are the lowering of the shareholding threshold to determine a director's independence to 5 per cent, from 10 per cent; to limit the tenure for an independent director (ID) to nine years, and to subject the re-appointment of IDs who have served more than nine years to an annual vote by all shareholders.

Here are some reactions from experts and investors:

John Lim, chairman, IREIT Global; immediate past chairman of SID:

"The Council has come up with two viable options to deal with the issue of independence of IDs, real or perceived, both of which deserve careful consideration. I personally prefer the hard rule as it provides clarity, facilitates board renewal and does not effectively reduce the number of available IDs.

"I believe the Council has taken a very balanced approach. I support the migration of important base line market practices to the SGX Listing rules and the setting up of an industry led CG Advisory Committee which I believe is overdue."

Chaly Mah, chairman, Singapore Accountancy Commission:

"I do not think that lowering the independent director's shareholding threshold to 5 per cent will impact the ability of companies to appoint independent directors. "I believe the reduction to 5 per cent is a move in the right direction and is consistent with other developed jurisdictions and is aligned with the substantial shareholding definition in the Companies Act.

"I think the introduction of an industry led Corporate Governance Advisory Committee to periodically review the Code of Corporate Governance is a good proposal as it allows the Code to be reviewed periodically in a timely manner to cater to changes and best practices."


Mark Liew, chief operating officer, Prime Partners:

"Overall, these changes reflect current practices. I don't expect the changes to have an outsized impact in terms of the listed companies' ability to comply with the changes.

"I think it is a relatively small number of individuals who have 10 per cent and are still considered independent directors. These people will rationally have to bring their shareholding down if they want to be independent, or be re-designated as non-executive, non independent director.

"The discussion has to be a broader one - not just on compliance and whether that will deter companies from coming to Singapore. I don't recall any clients of ours who decided not to go public because of compliance costs issues."

Ang Hao Yao, a private investor:

"As a private investor, I think that 10 per cent threshold should be retained."If the threshold is moved to 5 per cent, shareholders between 5-10 per cent stake won't be able to become an ID because I am not independent of the company under the new recommendation.

"The nine-year rule is a good recommendation for investors because investors will be responsible in deciding whether a director should still be considered independent after nine years. This measure should encourage a board to have a more robust renewal process. It should benefit investors in the long-term."