The Singapore Exchange (SGX) yesterday said it will amend its listing rules following the Monetary Authority of Singapore's (MAS) acceptance of a slew of recommendations to encourage board renewal and diversity as well as strengthen director independence.
The recommendations to amend the Code of Corporate Governance and the listing rules were made by the Corporate Governance Council after a public consultation exercise.
The rule changes include moves to strengthen director independence by rationalising tests of independence, lowering the shareholding threshold to determine a director's independence to 5 per cent from 10 per cent, and limiting the tenure for an independent director to nine years through a two-tier shareholders' vote.
Another major rule change, aimed at enhancing board composition and diversity, is to have at least one-third of boards comprise independent directors - if the chairman is not independent, the majority of the board should comprise independent directors; otherwise, the majority of the board should comprise non-executive directors. Companies must also disclose their board diversity policy and progress made.
The listing rule changes will come into effect on Jan 1 next year, except for the rules on the nine-year tenure for independent directors and the requirement for independent directors to comprise one-third of the board, which come into effect much later, on Jan 1, 2022.
"The longer transition period accords companies sufficient time to ensure the composition of their boards is able to meet the requirements of the listing rules," the SGX said.
ACHIEVING RIGHT BALANCE
The council had robust discussions over the last year to balance the perspectives of the various stakeholder groups. We have refined the recommendations in relation to director independence and board composition after taking into consideration feedback from the public consultation.
MR CHEW CHOON SENG, chairman of the Corporate Governance Council.
The Corporate Governance Council, which was set up by the MAS in February last year to review the Code of Corporate Governance, yesterday submitted to the authority its final recommendations on revisions to the code. "The recommended revisions to the code and SGX listing rules seek to enhance board quality by strengthening board independence and diversity, and encourage better engagement between companies and their shareholders as well as other stakeholders," the council said.
Council chairman Chew Choon Seng said: "The council had robust discussions over the last year to balance the perspectives of the various stakeholder groups. We have refined the recommendations in relation to director independence and board composition after taking into consideration feedback from the public consultation."
The council also recommended the establishment of an industry-led Corporate Governance Advisory Committee (CGAC).
The MAS has in turn accepted all the recommendations by the council and issued the revised code, which makes clear how companies should adopt the comply-or-explain regime.
In line with the recommendations, it also expects to set up an independent CGAC by the year end to monitor companies' implementation of the code, and provide support to companies by promulgating good practices and areas for improvement.
The CGAC will also advise regulators on corporate governance issues. It will comprise senior practitioners with experience as board chairmen or directors, corporate governance experts and representatives from diverse stakeholder groups.