SINGAPORE - It has been more than a year since the Monetary Authority of Singapore (MAS) made the nine-year threshold for independent directors (IDs) a hard limit written into the Singapore Exchange (SGX) Listing Rules, but some 43 per cent of companies in a recent survey still have IDs who have served more than nine years.

More smaller capitalised firms (45 per cent) have IDs who have served more than nine years, compared to large capitalised firms (37 per cent), the Singapore Board of Directors Survey 2019 found.

Asked about the Singapore Directorship Report (SDR) published last year, which showed 28 per cent having IDs who have served more than nine years, Associate Professor Chua Wei Hwa of the Singapore University of Social Sciences (SUSS) told The Business Times on Thursday (Nov 7) that SDR findings were collected from 737 listed companies.

In contrast, the Board of Directors Survey 2019 survey was sent out to 649 listed companies and received 127 responses, representing a response rate of 20 per cent.

"While that seems like a lower percentage than the 43 per cent reported in our sample, 28 per cent is still not a negligible number," said Dr Chua, who co-authored the survey report.

The survey, conducted between May and June 2019, was organised by the Singapore Institute of Directors (SID) and SGX, in collaboration with PricewaterhouseCoopers (PwC) Singapore and SUSS.

Dr Chua reckoned that the pool of independent directors might be insufficient to engage new IDs on board, or that the existing IDs have a wealth of experience that is still very much relevant to the companies.

With the MAS ruling, the appointment of the ID who have served beyond nine years will be subject to a two-tier vote by all shareholders excluding directors, CEO and associates. If the ID is not voted in, he or she can continue to serve on the board as a non-independent director.

Companies have up to Jan 1, 2022, to comply to MAS requirement. They also have to ensure that IDs make up one-third of their board seats.

The practice, which is already adopted by local banks since 2010, follows a proposal by the Corporate Governance Council (CGC) in January 2018 to enforce the "nine-year rule" on concerns that an ID who had served nine years might have had his independence compromised, given the familiarity with management, and can no longer be regarded as independent.

The survey also showed 53 per cent of respondent firms have in place a board diversity policy, notably in terms of gender, age, ethnicity and nationality.

About 63 per cent of respondent firms said that their boards had not convened board meetings to discuss corporate strategy, preferring to leave management to develop and execute the strategy.

Mr Ng Wai King, chair of the 2019 Board Survey Committee, said this is not advisable as the board should leverage the collective experience and external perspectives of the directors to guide management in shaping a company's strategy.

"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," Mr Ng said.

About 80 per cent of the firms say their boards have in place succession planning of their chief executive officer and top executive leadership team. However, 65 per cent of the firms conduct succession planning in an informal manner.

Surprisingly, despite the prevailing economic uncertainties due to ongoing trade tensions between the US and China, as well as geopolitical tensions, many surveyed felt the economic situation has improved from previous years.

Dr Chua explained, "Given the current climate, this might seem surprising. One possible explanation is Singapore's strong fundamentals and in the past, have been fairly resilient. Another possible explanation is the timing of the survey. The global stock market experienced a run -up in the first half of 2019, following global sell-off in mid 2018. This could be a reflection of sentiments of a rising stock market during the survey."

Commenting on the findings, 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,'' Ms Sim said.