SGX-listed Companies Score High in Corporate Governance Study.
By RANAMITA CHAKRABORTY
Regulation Asia, 3 August 2023
A recent study assessed the corporate governance practices of Singapore-listed companies, covering board responsibilities, rights of shareholders, engagement of stakeholders, accountability and audit, and disclosure and transparency.
Companies listed on the SGX (Singapore Exchange) have shown notable progress in their corporate governance and financial transparency, according to the recently launched 2023 Singapore Governance and Transparency Index (SGTI).
The annual study is jointly conducted by CPA Australia, the National University of Singapore Business School’s Centre for Governance and Sustainability and the Singapore Institute of Directors.
The SGTI serves as an important barometer of the Singapore capital market. Its individual and collective scores offer insights on the corporate governance practices of Singapore-listed companies.
Companies were assessed on board responsibilities, rights of shareholders, engagement of stakeholders, accountability and audit, and disclosure and transparency.
This year, the index evaluated a total of 474 listed companies as well as 43 real estate investment trusts (REITs) and business trusts based on their annual reports which were released by 31 May.
During the launch of the Singapore Governance and Transparency Index 2023 at the Singapore Governance and Transparency Forum yesterday (2 August), SGX RegCo CEO Tan Boon Gin said that his organisation has implemented rules “designed to ensure that the companies that do list are companies that people would want to invest in”. These include requirements on profitability and market capitalisation, as well as other rules designed to ensure good governance and internal controls.
In his speech, he noted that SGX has worked with the Association of Banks in Singapore to raise due diligence standards for companies planning to list on the exchange.
“We are also doing more behind the scenes to actively engage our companies on our expectations, and how they can make appropriate and timely disclosures,” said Tan.
According to him, an attractive capital market isn’t just about the exchange. The individual companies and their branding are just as important if not more important.
“In today’s uncertain and challenging world, the link between governance and branding is stronger than ever,” he stressed.
Improved SGTI scores
The SGTI scores in the general category and the REITs and business trust category saw significant improvements. Scores in the general category rose by 4.2 points year-on-year to reach 74.8 points, representing the largest jump since 2020. Meanwhile, the REITs and business trusts category saw a noteworthy growth of 4.0 points year-on-year, reaching a score of 89.3 points.
Within the general category, Singaporean telecommunications conglomerate Singtel secured the top position while banking and financial services group DBS and airport service company SATS came in tied for second place. Meanwhile, the other two Singaporean banks remained in the top 10. UOB maintained its fourth position and OCBC dropped one spot from seventh to eighth.
The index revealed that the disclosure of stakeholder engagement practices saw the most significant improvement, with mean scores rising by nine percentage points to reach 70 percent.
SGX believes the number of disclosure-related queries will decline further as companies become more adept at producing clear, current and comprehensive disclosures, noted Tan.
“The result will be that the market will function more smoothly, queries from the regulator will become fewer and disclosures will become higher quality,” said Tan, adding this is a work in progress.
In the past year, the SGX has already seen an encouraging decrease in the number of queries that they have had to pose to its listed companies.
The SGTI also highlighted efforts made by REITs and business trusts to improve their governance practices. Firstly, the practice of linking remuneration to directors’ performance increased from 77 per cent to 93 per cent.
Additionally, appointing new directors with relevant skills and experience rose from 61 per cent to 77 per cent, and having the board oversee the implementation of corporate strategy increased from 59 per cent to 81 per cent.