Moves to limit the term that independent directors serve on a company board to nine years are struggling to gain traction in corporate Singapore, a new survey has found.
It noted that 45 per cent of smaller capitalised firms have "indies" who have clocked up more than nine years. The level is 37 per cent for large firms.
The Singapore Board of Directors survey went to 649 listed firms in May and June and garnered 127 responses, or 20 per cent.
The poll was organised by the Singapore Institute of Directors and the Singapore Exchange (SGX) in collaboration with PwC Singapore and Singapore University of Social Sciences (SUSS).
A lack of talent may be hindering efforts to meet the nine-year limit the Monetary Authority of Singapore (MAS) flagged over a year ago.
Associate Professor Chua Wei Hwa from SUSS reckoned that the number of qualified independent directors might be insufficient to engage new candidates or that existing ones have a wealth of experience that is still highly relevant to their firms.
Under the MAS ruling, appointment of an independent director who has served beyond nine years will be subject to a two-tier vote by shareholders, excluding directors, the chief executive and associates.
If the director is not voted in, he can continue to serve as a non-independent director.
Firms have up to Jan 1, 2022, to comply with the MAS requirement.
They also must ensure that "indies" make up a third of the board.
This practice, which has been adopted by local banks since 2010, follows a proposal by the Corporate Governance Council in January last year to enforce the "nine-year rule". This stemmed from concerns that an independent director who has served nine years might have had his independence compromised, given the familiarity with management.
Ms June Sim, head of listing compliance at SGX RegCo, said companies should recognise that how the board and, in particular, independent directors conduct themselves will affect investors' confidence in the company and the market.
"It is therefore important that companies do not adopt a check-box approach to their continuous listing obligations; substance should always matter over form," she added.
The survey also showed 53 per cent of respondent firms have a board diversity policy, notably in terms of gender, age, ethnicity and nationality.
In other findings, 63 per cent of respondents said their boards had not convened meetings to discuss corporate strategy, preferring to leave that to management.
Mr Ng Wai King, chair of the 2019 board survey committee, said this is not advisable. "Strategy oversight should not be left to management alone. The board's input on strategy is critical, bearing in mind the fiduciary duty of a director in discharging his or her role."
About 80 per cent of respondent firms said their boards have succession planning in place for chief executives and top executives.
However, 65 per cent said they conduct this planning in an informal manner.
