Letter by Tan Kok Tim, “Amend legislation to ensure board independence soon” (VOICES, 30 Dec 2014)

Date: January 9, 2015

We refer to the letter by Tan Kok Tim, “Amend legislation to ensure board independence soon” (VOICES, 30 Dec 2014).

The Securities Investors Association (Singapore) (SIAS) monitors closely the developments of corporate governance practices of boards of SGX listed companies as the investments of retail investors in listed companies are safer with companies which practice good governance. In particular, SIAS is concerned about the independence of boards of SGX listed companies, as independent directors provide assurance to minority shareholders that their interest will be looked after. Therefore, SIAS conducts yearly research on all listed companies to and track their corporate governance practices.

Our research, conducted in collaboration with SMU Sim Kee Boon Institute, shows that in 2014, 58% of listed companies have board composition with at least half being independent directors. Although we note see a trend that more listed companies have at least 50% independent directors on the board, we hope more companies would improve on the composition and we encourage more companies to better ensure independence on the board.

To our knowledge, no major Asian market has legislated board independence. Likewise in Singapore, companies are expected to disclose their practices, complying with or explaining for deviations from the Code of Corporate Governance, and shareholders are expected to push for better governance practices. Investors in a listed company should seek accountability from boards which are not compliant with the Code of Corporate Governance. If the company shows unwillingness to comply with the Code, shareholders have the option to sell their shares.

Corporate governance is not just the responsibility of the board and the independent directors. Shareholders play an important role in seeking board accountability by asking questions, attending meetings and keeping track of announcements. It is through this collaborative effort that corporate governance standards can be raised in Singapore.

Mr Tan also provided feedback on a current practice which he observed is prevalent in some listed companies, whereby top executives “breathe down the necks of other directors at meetings, thus ignoring the spirit of independence of directors”. SIAS would like to invite Mr Tan to share more information on the feedback. SIAS would not hesitate to intervene against such companies as we take a serious view of companies which do not practice good corporate governance.

David Gerald
President & CEO
Securities Investors Association (Singapore)