Realising Higher

Corporate Governance Standards

Assoc Prof Lawrence Loh Centre for Governance, Institutions and Organisations

NUS Business School 24 July 2014

The GTI Journey • 6 years in the running (from 2009 to 2014)

– First ranking published in April 2009 at CPA Forum 2009 • Ranking table annually published in The Business Times

– Covers Singapore-listed companies

2

(2 August 2013)

Aim: Reflect key trends within Singapore’s corporate governance landscape

(27 April 2012) (5 August 2011)

The GTI Project Collaborated by

Supported by

3

(Sponsor)

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)

4

• 644 companies that released ARs for FY-end 2013 • For companies with Dec FY-end, cut-off: 31 May 2014 • 132 companies excluded:

– Newly-listed companies that do not have full year’s financial report (22) – Secondary listing (31) – Companies that comply with other CG code in addition to the Singapore

code (2) – Suspended (24) – Delisted (5) – Exchange Traded Funds (7) – REITS & Trusts (41)

5

GTI Methodology

GTI 2014 – Data Coverage

• Annual reports • Company announcements: 1 Jan 2012 to 31 December 2013 • Corporate websites • Information obtained from companies via investor relations • Media articles: 1 January 2012 to 31 May 2014

6

GTI 2014 – Data Sources

GTI Methodology

Mr Ang Hao Yao, Chairman, Sata CommHealth

Mrs Lee Suet Fern, Senior Director, Stamford Law Corporation

Mr Loh Hoon Sun, Managing Director, Phillip Securities

Mr Chaly Mah, Chairman, Deloitte Singapore

Mr Alvin Tay, Editor, The Business Times

7

GTI Advisory Panel

8

GTI 2014 Key Findings

GTI Scores

33.9 33.5 31.5

34.9

38.0

42.1

25.0

30.0

35.0

40.0

45.0

GTI 2009 GTI 2010 GTI 2011 GTI 2012 GTI 2013 GTI 2014

Aver

age

Poi

nts

9

10

The New Code Effect

31.5 34.0

36.4 37.1

31.9

35.4

38.9

44.9

25.0

30.0

35.0

40.0

45.0

50.0

GTI 2011 GTI 2012 GTI 2013 GTI 2014Jan-Oct FY End; Code 2005 Nov - Dec FY End; Code 2012

Aver

age

Poi

nts

Time effect

New Code effect

11

Distribution of GTI Scores

27

34

39

27

33

40

24

30

37

26

33

40

29

35

43

31

40

50

0

5

10

15

20

25

30

35

40

45

50

25th 50th 75th

GTI2009GTI2010GTI2011GTI2012GTI2013GTI2014

GTI

Tot

al P

oint

s

GTI Points Percentile

12

GTI 2014 - HIGHLIGHTS

REMUNERATION MATTERS

ACCOUNTABILITY & AUDIT MATTERS

BOARD MATTERS

TRANSPARENCY & INVESTOR RELATIONS

13

REMUNERATION MATTERS

Remuneration Disclosure

Remuneration Package

GTI 2014 - HIGHLIGHTS

Remuneration Disclosure

14

Exact Disclosure

4.2% 1.8%

6.8% 9.8%

2.1%

11.6%

21.6%

3.1%

23.8%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

Executive directors Top 5 executives Non-executive directors

Perc

enta

ge o

f Com

pani

es

GTI2012GTI2013GTI2014

15

Remuneration Package Performance Measures

Perc

enta

ge o

f Com

pani

es 14.3%

10.0% 8.2%

0.0%

5.0%

10.0%

15.0%

20.0%

Disclosure of performance measures

GTI2012

GTI2013

GTI2014

16

ACCOUNTABILITY & AUDIT MATTERS

Audit Committee

Composition

Whistleblowing Policy

Risk Management

GTI 2014 - HIGHLIGHTS

Audit Committee Composition

17

Members with Accounting or Finance Background

51.0%

80.0%

55.1%

79.8%

52.0%

77.3%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

Committee majority Chairman

Perc

entg

ae o

f Com

pani

es

GTI2012

GTI2013

GTI2014

18

Companies with Whistleblowing Policy

Whistleblowing Policy

9.5% 9.9% 16.3%

77.3%

85.8%

92.2%

0.0%

20.0%

40.0%

60.0%

80.0%

100.0%

120.0%

GTI2012 GTI2013 GTI2014

Perc

enta

ge o

f Com

pani

es

Whistleblowingpolicy available

Key detailsdisclosed andanonymousreporting allowed

Risk Management

19

Risk Assurance

5.9%

1.0%

8.9% 9.9% 12.0%

45.3%

0.0%

20.0%

40.0%

Having a separate board-levelrisk committee

CEO/CFO certification offinancial statements

Perc

enta

ge o

f Com

pani

es

GTI2012GTI2013GTI2014

Risk Management

20

Risk Framework Adequacy

Perc

enta

ge o

f Com

pani

es

12.2%

53.4%

22.3%

82.4%

24.5%

82.0%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

Process and framework disclosed Statement by the Board or AuditCommittee on the adequacy

GTI2012GTI2013GTI2014

21

BOARD MATTERS

Director Independence

Director Involvement

Director Development

GTI 2014 - HIGHLIGHTS

Director Independence

22

Assessment of Independence

7.3%

28.6%

12.8%

32.1%

24.7%

44.6%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

45.0%

50.0%

Independence from majorshareholders

Description of independence

Perc

enta

ge o

f Com

pani

es

GTI2012GTI2013GTI2014

23

16.9% (109 Companies)

24.7% (159 Companies)

Yes

Yes

Board Leadership and Independence Director Independence

Needs improvement by FY 2017 (58.4%, 376 Companies)

Board has independent chairman?

Lead independent director + at least 50% board independence

No

No

24

Director Independence Pe

rcen

tage

of C

ompa

nies

Independent Directors with more than 9 years Tenure

36.9% 37.2% 37.8%

30.0%

32.0%

34.0%

36.0%

38.0%

40.0%

At least 1 ID

GTI2012GTI2013GTI2014

Director Involvement

25

Busy Independent Directors on Board

11.3%

2.4%

9.5%

0.9%

10.9%

1.7%

0.0%

5.0%

10.0%

15.0%

20.0%

2 busy IDs More than 2 busy IDs

Perc

enta

ge o

f Com

pani

es

GTI2012GTI2013GTI2014

GTI Methodology: Definition of busy director Full time employment: No more than 4 directorships Non-full time employment: No more than 6 directorships

Director Involvement

26

Disclosure of Directorships in other Listed Companies Pe

rcen

tage

of C

ompa

nies

(25.2%) (27.1%)

(40.7%)

(35.1%) (29.7%)

(24.7%)

0.0%

20.0%

40.0%

60.0%

80.0%

GTI2012 GTI2013 GTI2014

Only currentdirectorships

Present &past 3 yearsdirectorshipdisclosed

56.8% 65.4%

60.3%

Director Development

27

Director Appraisal

11.9%

32.9%

10.5%

35.4%

19.9%

38.4%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

45.0%

Disclosure of process Disclosure of criteria

GTI2012

GTI2013

GTI2014

Perc

enta

ge o

f Com

pani

es

Director Development

28

Continuity and Competence

0.9%

7.4%

3.0%

7.8%

4.4%

15.1%

0.0%

5.0%

10.0%

15.0%

20.0%

Disclosure on successionplanning

Disclosure on director training

Perc

enta

ge o

f Com

pani

es

GTI2012GTI2013GTI2014

29

TRANSPARENCY & INVESTOR RELATIONS

Shareholder Communication

Shareholder Participation

GTI 2014 - HIGHLIGHTS

30

Availability of Information on Company’s Website

Shareholder Communication

57.6%

15.3%

66.4%

21.1%

63.8%

21.6%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

Latest financial results Results briefing slides

GTI2012GTI2013GTI2014

Perc

enta

ge o

f Com

pani

es

31

Shareholder Communication

Perc

enta

ge o

f Com

pani

es

Investor Relations Correspondence

46.7%

13.1%

54.4%

12.5%

56.5%

10.4%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

IR contact given Emails response within a week

GTI2012GTI2013GTI2014

32

Voting Practices at AGM

Perc

enta

ge o

f Com

pani

es

Shareholder Participation

6.1%

10.4%

6.5%

12.0%

24.1% 22.8%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

Poll Detailed information onvoting results

GTI2012GTI2013GTI2014

Base Score

• Most improved areas : - Process for Board appraisal is disclosed in detail (16.1%) - Disclosure of all the directorships and chairmanships held by

directors currently and over the past 3 years (13.6%) - Process in appointing directors are explained in detail (12.5%)

33

37.7 41.0

43.4

30

35

40

45

GTI2012 GTI2013 GTI2014

Aver

age

Poin

ts

Bonus

• Most common areas : – CEO/CFO certification of financial statements (45.3%) – Comprehensive description of how company assesses

independence of directors (44.6%) – Definition of independence to include independence from

major shareholders (24.7%)

34

2.2 3.0

5.5

0

2

4

6

GTI2012 GTI2013 GTI2014

Aver

age

Poin

ts

Penalty

• Most common areas: – Same independent directors sitting on nominating, remuneration &

audit committees (44.1%) – There are 2 or more independent directors with tenure of more than 9

years (22.8%) – CEO/Managing Director/Executive Director not subject to re-election

(21.6%)

35

5.1 5.9 6.8

0

2

4

6

8

GTI2012 GTI2013 GTI2014

Aver

age

Poin

ts

GTI 2014 Summary

• Impacts of the new Code are visible • State of disclosure practices have generally improved over

last 5 years • Average overall GTI points of the listed companies is at all-

time high of 42.1 over 6 years • Several companies made significant improvements in the

disclosures & practices but there are still rooms for improvement

We are realising higher corporate governance standards

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The End

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