62% Firms in Singapore Have Independent Directors on their Boards

October 25, 20164:42 pm408 views

62% firms in Singapore have Independent Directors (Ids) on their boards, forming at least half the board – a notable increase from 55% in 2014. In Large-cap firms, 65% of IDs formed at least half the board. In mid-cap firms, that percentage increased by 15 percentage points to 61%.

These findings were released in a report on board directorship of Singapore-listed companies, launched by the Singapore Institute of Directors (SID) and the Institute of Singapore Chartered Accountants (ISCA). The SID-ISCA Singapore Directorship Report 2016 found that more firms have a greater proportion of independent directors on their boards.

The Singapore Directorship Report provides an in-depth analysis of 3,780 directors on the boards of 758 Companies, Business Trusts and REITs listed on the SGX as at 31 December 2015.

Mr Adrian Chan, Deputy Chairman, SID Advocacy & Research Committee, said; “The Singapore Directorship Report continues to be the most definitive study on the state of directorships amongst listed companies in Singapore and it remains a landmark study in this area.”

Mr Ho Tuck Chuen, Chairman, ISCA Corporate Governance Committee, commented, “The finding that firms are having a greater proportion of independent directors on their board is a positive trend. Independent directors can bring with them the benefits of providing an independent and objective view on their board, thus acting as a check and balance on the acts of the board and management of the company.”

According to the report, although the average board size of 6.6 directors has remained relatively stable since the first report in 2014, there seems to be a movement towards smaller boards, with the number of large boards with more than 8 directors reducing by 8% to 110 and the number of smaller boards with less than 6 directors increasing by a significant 28% to 239. The size of boards is very much positively related to market capitalisation as larger firms do tend to have larger boards.

Executive Chairs continue to dominate most of the board arrangements, with 54% of firms having them; although there has been a slight increase in the number of Independent Chairs since 2014, especially among Mid and Small-caps.

Another key finding is the trend of greater independence across boards. This can be seen by the increased proportion of independent director (ID) seats since the 2014 report, with boards having 49% ID seats and the percentage of non-ID seats decreasing from 53% to 51%.

Another sign of this trend of greater independence is the increase, from 54% to 68%, of the firms that appointed a Lead ID, as required by Guideline 3.3 of the Code.  Overall, there has been a 30% increase in the number of Lead IDs (396) as compared with 2014 (304). Interestingly, 15% of firms appoint a Lead ID even when they are not required to do so, which is nearly a doubling of the 9%  in 2014.

Conversely, alternate directorship is on the decline as the percentage of alternate directors has dropped to 5% as compared to 6% in 2014.

The median tenure of IDs across all firms is 5 years.  37% of IDs have been with their firms since listing. For firms which have been listed for more than 9 years, 64% of them have one or more long-tenured IDs who have served more than nine years. About 28% of IDs are long tenured.

On the hotly debated topic of gender diversity, the percentage of women directors crept up from 10% to constitute 11% of the total pool of directors. The gender bias is not influenced by market capitalisation and is generally consistent across all size categories.

Slightly more than half of all firms have no women on their boards and this is size dependent. Large-cap (42%) and Mid-cap firms (43%) have the smallest percentage of all male boards, as compared to Small-cap firms (57%).

Large- and Mid-cap firms  are leading the way in the gender diversity stakes as the proportion of all male boards for both segments have fallen the most drastically,  by nearly 10 percentage points from 51% in 2014 to 42%.

Majority (82%) of directors hold only one director seat. However, a significantly higher percentage of ID seats filled in Small-caps (12%) are taken up by individuals who hold four or more other directorships as compared with Mid-caps (8%) and Large-caps (8%).

For board seats which were filled from 2014 to 2015, 44% of them are directors with at least one other board seat. This suggests that firms have a strong tendency to look for directors with existing listed board experience when searching for IDs. There are actually five directors who chair four boards; nine directors who chair three boards and 42 directors who chair two boards.

A much smaller percentage of women directors hold multiple directorships compared with men. It was found that most IDs are highly committed to attending board meetings, with  87% of IDs having an attendance rate of more than 75% of all board meetings held.

The highest absenteeism rate is from Non-Independent, Non-Executive Directors, with 11% of them having attended 50% or less of all board meetings.

 

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