SGX: Key Findings Of 6th Singapore Board Of Directors Survey

The Singapore Institute of Directors, in conjunction with Singapore Exchange, Aon Consulting (Global Research Centre), Egon Zehnder International and PricewaterhouseCoopers today announced the findings of their latest survey on Board practices among listed companies in Singapore.

The survey, conducted from December 2008 to April 2009, is the 6th in a series of regular surveys to review Board practices of listed companies in Singapore in relation to recommendations of Singapore Code of Corporate Governance. The 6th survey sought to highlight developments of board practices and the findings revealed continuing improvement trends. These surveys began in year 2000.

Key findings of the Survey include:

1. Executive directors (EDs) and non-executive directors (NEDs) hold no additional directorships in listed companies. Compared to the findings in 2005, the percentage of EDs with no additional directorships increased 3 percentage point to 13% while a 10 percentage point increase to 15% was noted for NEDs. The modal range for additional directorships in listed companies for EDs and NEDs remained similar at 1 to 2.
2. There is an increased element of independence as more NEDs hold scheduled meetings without the presence of the CEO and EDs in 2008. This represents an increase to 33% in 2008 as compared to 23% in 2005.
3. More companies have established a formal process to assess the suitability of the directors prior to appointment. 85% of the companies adopt a formal approach in 2008. Previously, it was 83% in 2005.
4. More companies are providing relevant directorship training, such as strategic management, legal, accounting and auditing management, to NEDs. The training would enhance directors’ understanding of the business dynamics and equips them with greater management and functional skills to deal with the fast changing environment.
5. Risk management is cited as the most pertinent training area, understandable in view of the uncertain market environment.
6. The percentage of companies that conducted some form of board appraisal has declined as compared to 2005 (72% in 2008 vs. 78% in 2005), more substantially for Board committees (47% in 2008 vs. 66% in 2005) and individual directors (52% in 2008 vs. 73% in 2005).
7. While most companies are managing such reviews on their own, we note an increase in the number of companies that engage an external party to conduct such appraisals, compared to 2005. For example, 8% of these companies engage external parties to conduct individual director appraisal in 2008 vs 3% in 2005.
8. About 80% of companies conduct periodic CEO performance evaluation, look into succession planning as well as the development of their CEO and top executive team. This is consistent with observed global trends.
9. Fewer companies are remunerating NEDs through stock options, performance share plans and restricted share plans. These are long term incentive tools more commonly used to reward CEO/top executives.
10. While majority of the companies indicated a good understanding of their company’s risks, the proportion of companies with an enterprise-wide risk management (ERM) system in place was 41% in 2008, with another 59% plan to implement the ERM system within 3 years. In 2005, 54% of companies said they had an ERM system.
11. For three consecutive surveys since 2004, the “people” factor has been identified as the most challenging factor and also the key driving force in managing risks. Other challenges include the availability of information and a difference in the perception of the role of risk management between senior management and more operation management.
12. A majority of the companies (70%) has put in place a whistleblower policy to protect employees who came forward with information against reprisals, a significant improvement from 20% in 2005.
13. Companies communicate with their investors and other stakeholders more actively than before.