Findings on the Singapore GTI 2015Pushing to a New Frontier of Corporate Governance

Professor Lawrence LohDirector

Centre for Governance, Institutions and OrganisationsNUS Business School

18 August 2015

1

Governance & Transparency Index (GTI)

Supported By

(Sponsor)

A Collaboration Between

2

GTI Structure

Board matters (Max = 35 points)

Remuneration matters (Max = 20 points)

Accountability & audit matters (Max = 20 points)

Transparency & investor relations (Max = 25 points)

Base score (Max = 100 points)

Adjustments for bonuses/penalties (+/-)

Overall GTI score (Max = 143 points)

3

• 639 listed companies that released annual reports for FY-end 2014

• Cut-off date for annual report release: 31 May 2015

• 139 companies excluded – Newly-listed companies that do not have a full year’s financial report (25)

– Secondary listing (35)

– Company that primarily complied with another code in addition to Singapore’s Code of Corporate Governance (1)

– Exchange Traded Funds (7)

– REITS and Business Trusts (44)

– Suspended (22)

– Delisted (4)

– Company that did not release annual report for the last two years (1)

4

GTI Methodology

Data Coverage

1. Annual reports

2. Corporate websites

3. Investor relations information

4. Company announcements on SGX: 1 Jan 2013 to 31 Dec 2014

5. Media articles: 1 Jan 2013 to 31 May 2015

5

Information Source

GTI Methodology

6

Mr Alvin Tay, Editor, The Business Times

Mr Ang Hao Yao, Chairman, Sata CommHealth

Mr Chaly Mah, Chairman, Deloitte Singapore

Mrs Lee Suet Fern, Managing Partner, Morgan Lewis Stamford

Mr Loh Hoon Sun, Managing Director, Phillip Securities

GTI Advisory Panel

GTI 2015 Key Findings

7

GTI Scores

8

33.9 33.5

31.5

34.9

38.0

42.1

47.6

30

35

40

45

50

GTI2009

GTI2010

GTI2011

GTI2012

GTI2013

GTI2014

GTI2015

Me

an S

core

GTI Score Distribution

9

3 6

35

171

243

105

45

2213 14

1 4 21 5

32

115

177

155

86

33

1811

3 4 40 1

23

53

144

174

130

67

2013

6 3 5

0

50

100

150

200

250

300

< 0 10 20 30 40 50 60 70 80 90 100 110 > 110

Nu

mb

er

of

Co

mp

anie

s

GTI Total Score

GTI 2013

GTI 2014

GTI 2015

The Curve Effect

10

-160

-140

-120

-100

-80

-60

-40

-20

0

20

40

60

80

100

120

140

160

-5 -4 -3 -2 -1 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

Ran

k D

iffe

ren

ce

GTI Score Difference

Score vs Rank Difference(Middle Range (25th to 75th percentile) of Companies)

Increasing Competition

11

Companies have to increase their scores by at least 7 points to retain or improve status quo.

Maintaining the same score (score difference = 0) will lead to a fall in about 100 ranks.

Presentation Overview

Board MattersNomination

MattersRemuneration

Matters

Accountability & Audit

Transparency & Investor Relations

Board Matters

13

Board Matters

Disclosure of directorships in listed companies

Have lead independent director where chairman is non-independent

Disclosure of director training

Board Matters: Overview

14

15

27.1%

40.7%

54.3%

29.7%

24.7%

26.4%

0%

20%

40%

60%

80%

GTI2013 GTI2014 GTI2015

Pe

rce

nta

ge o

f C

om

pan

ies

Disclosure of directorships in listed companies

Disclosure of only currentdirectorships

Disclosure of all directorshipsat present & past 3 years

Board Matters

Board Matters

16

39.7%

51.4%

63.0%

0%

10%

20%

30%

40%

50%

60%

70%

GTI2013 GTI2014 GTI2015

Pe

rce

nta

ge o

f C

om

pan

ies

Have lead independent director where chairman is non-independent

Board Matters

17

7.8%

15.1%

21.8%

0%

5%

10%

15%

20%

25%

GTI2013 GTI2014 GTI2015

Pe

rce

nta

ge o

f C

om

pan

ies

Disclosure of director training

Nomination Matters

18

Nomination Matters

Disclosure of directorship limits

Director appraisal

Nomination Matters: Overview

19

20

Nomination Matters

3.2%

8.5%

24.7%

0%

5%

10%

15%

20%

25%

30%

GTI2013 GTI2014 GTI2015

Pe

rce

nta

ge o

f C

om

pan

ies

Disclosure of directorship limits

Nomination Matters

21

3.3%

10.5%

35.4%

3.6%

19.9%

38.4%

4.1%

24.1%

41.2%

0%

10%

20%

30%

40%

50%

External party to conductappraisal

Disclosure of process Disclosure of criteria

Pe

rce

nta

ge o

f C

om

pan

ies

Director appraisal

GTI2013

GTI2014

GTI2015

Remuneration Matters

22

Remuneration Matters

Disclosure of exact director remuneration

Disclosure of exact executive remuneration

Disclosure of link between remuneration & performance

Remuneration Matters: Overview

23

Remuneration Matters

24

9.8%11.6%

21.6%23.8%

27.5%

31.3%

0%

5%

10%

15%

20%

25%

30%

35%

Executive Directors Non-Executive Directors

Pe

rce

nta

ge o

f C

om

pan

ies

Disclosure of exact director remuneration

GTI2013

GTI2014

GTI2015

25

Remuneration Matters

2.1%

7.8%

3.1%

18.2%

3.8%

24.3%

0%

5%

10%

15%

20%

25%

30%

Top 5 Executives CEO

Pe

rce

nta

geo

fC

om

pan

ies

Disclosure of exact executive remuneration

GTI2013

GTI2014

GTI2015

Remuneration Matters

26

9.9%8.2%

37.4%

0%

5%

10%

15%

20%

25%

30%

35%

40%

GTI2013 GTI2014 GTI2015

Pe

cen

tage

of

Co

mp

anie

s

Disclosure of link between remuneration & performance

Accountability & Audit Matters

27

Accountability & Audit

At least half of audit committee members have accounting/finance background

CEO/CFO certification of financial statements

Disclosure of whistleblowing policy details

Accountability & Audit Matters: Overview

28

Accountability & Audit Matters

29

55.1%52.0%

78.2%

0%

10%

20%

30%

40%

50%

60%

70%

80%

GTI2013 GTI2014 GTI2015

Pe

rce

nta

ge o

f C

om

pan

ies

At least half of audit committee members have accounting/finance background

Accountability & Audit Matters

30

9.9%

45.3%

89.4%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

GTI2013 GTI2014 GTI2015

Pe

rce

nta

ge o

f C

om

pan

ies

CEO/CFO certification of financial statements

Accountability & Audit Matters

31

85.8%

9.9%

92.2%

16.3%

94.5%

23.3%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Whistleblowing policy available Key details disclosed &anonymous reporting allowed

Pe

rce

nta

ge o

f C

om

pan

ies

Whistleblowing policy

GTI2013

GTI2014

GTI2015

Transparency & Investor Relations

32

Transparency & Investor Relations

Transparency & Investor Relations: Overview

33

Voting at general meetings

Investor relations

Transparency & Investor Relations

34

6.5%

12.0%

24.1% 22.8%

55.2%

26.4%

0%

10%

20%

30%

40%

50%

60%

Poll voting Disclosure of detailed vote resultsinformation

Pe

rce

nta

ge o

f C

om

pan

ies

Voting at general meetings

GTI2013

GTI2014

GTI2015

Transparency & Investor Relations

35

74.7%

54.4%

78.4%

56.5%

76.7%

57.1%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

Dedicated IR link on website IR contact given

Pe

rce

nta

ge o

f C

om

pan

ies

Investor relations

GTI2013

GTI2014

GTI2015

GTI Score Overview

36

41.0

3.05.9

43.4

5.5 6.8

50.7

5.88.8

0

10

20

30

40

50

60

Base Bonus Penalty

Me

an S

core

Mean Score

GTI2013

GTI2014

GTI2015

Improvements

37

CEO/CFO certification of financial statements

Disclosure of link between remuneration and performance

Disclosure of number of directorships a director can hold

Poll voting44.1% pts

31.1% pts

16.2% pts

29.2% pts

Percentage points of companies

Room for Improvement

38

Disclosure of director trainings

Company has whistleblowing policy in place, discloses key details and anonymous complaints allowed

Percentage of companies complied

21.8%

23.3%

Investor relations contact given 57.1

%

GTI2015 Summary

• Average overall GTI points at all-time high of 47.6

• Visible impact of more widespread adoption of

the Code

• Significant progress in disclosures and practices

but there is still room for improvement

39

40

Pushing to a New Frontier of Corporate Governance