S’pore-listed firms must declare salaries and all payouts made to directors and CEOs under new rule
By OVAIS SUBHANI
The Straits Times, 11 January 2023
SINGAPORE - All Singapore-listed companies will need to disclose the exact amount and breakdown of salaries and other payments made to their directors and chief executive officers in their annual reports.
The new rule will take effect for annual reports prepared for the financial years ending on or after Dec 31, 2024.
The new mandate, aimed at boosting corporate transparency on remuneration and aligning the disclosure practices with the best global standards, was part of several amendments made to the Singapore Exchange’s (SGX) listing rules and the Code of Corporate Governance.
In separate statements on Wednesday, the Singapore Exchange Regulation (SGX RegCo), the regulatory arm of SGX, announced amendments to the listing rules, while the Monetary Authority of Singapore (MAS), the integrated regulator and supervisor of financial institutions in the Republic, announced changes to the Code of Corporate Governance to incorporate the new rule.
The information to be disclosed must include the base or fixed salary, variable or performance-related income or bonuses, benefits in kind, stock options granted, share-based incentives and awards, and other long-term incentives. The rule also requires companies to disclose remuneration paid to the individual directors and CEO by the company’s subsidiaries.
Companies have for long argued that for competitive reasons, remuneration details should be kept vague. However, market participants, both institutional and retail investors, have always sought full disclosure.
SGX RegCo said the increased transparency on remuneration will help investors of listed companies assess whether directors and CEOs are appropriately incentivised.
In a related move, the code and listing rules were also amended. The tenure of independent directors serving on the boards of listed companies will be capped at nine years. The limit is intended to encourage companies to renew their boards with new talent and skill sets, and make them more diverse.
To give affected companies enough time to search for replacements, independent directors whose tenure exceeds the nine-year limit can continue to be deemed independent until the company’s annual general meeting held for the financial year ending on or after Dec 31, 2023.
SGX RegCo will also remove, with immediate effect, the two-tier vote mechanism for companies to retain long-serving independent directors who have served more than nine years.
Previously, long-serving independent directors could continue to be deemed independent as long as their appointment was approved by all shareholders, and then by all shareholders excluding the directors and the CEO of the company.
This mechanism was widely used by issuers to retain hundreds of long-serving independent directors, inhibiting board renewal and progress on board diversity, SGX RegCo said.
Mr Tan Boon Gin, CEO of SGX RegCo, said: “These changes provide an opportunity for companies to inject new skills, experience and knowledge into their boards, all of which will be invaluable in guiding the business for the long term.”
Mr Masagos Zulkifli, Minister for Social and Family Development, said the cap on tenure of independent directors will not only promote good governance, but it will also promote diversity in the board of directors.
“This is also in line with our action plans in the White Paper on Singapore Women’s Development, to increase the representation of women on boards.
“I encourage companies to use this opportunity to think actively about succession planning and refresh their boards with the right mix of board directors to best chart their path forward,” he said.
MAS said that in accordance with the new rules, it will also amend the “Notice to all holders of a capital markets services licence for real estate investment trust (Reit) management”, which lays out requirements on Reit managers’ board, their governance and remuneration for key personnel.
Mr Lim Tuang Lee, MAS’ assistant managing director for capital markets, said: “High standards of corporate governance, characterised by strong accountability and transparency, are critical in upholding investor confidence in our capital markets.
“The latest enhancements, which are in line with global best practices, are important steps to further strengthen director independence, encourage board renewal and improve market transparency,” he added.
The revisions to the code and listing rules follow recommendations made by the Corporate Governance Advisory Committee on Sept 13, 2022.
The committee recommendations were in response to a review of SGX-listed companies’ compliance with the code, which was conducted by audit firm KPMG.
SGX RegCo said the committee’s proposals received broad market support during public consultation conducted between Oct 27 and Nov 17, 2022.
Mr David Gerald, the president and CEO of the Securities Investors Association (Singapore), said: “Shareholders rely on independent directors to ask the necessary questions and shape the business strategy towards the best outcome for investors and the company.
“Making clear how independent directors and executive directors, including the CEO, are rewarded... also informs investors’ decision-making. We hope companies will embrace these new rules wholeheartedly so as to elevate their own governance and improve overall market standards.”