[PPT] - Are We Ready? Associate Professor Lawrence Loh Director Centre PowerPoint Presentation

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The New Corporate Governance Landscape – Are We Ready?

Associate Professor Lawrence Loh Director Centre for Governance, Institutions and Organisations NUS Business School

7 August 2019

Findings of the Singapore Governance and Transparency Index 2019 Presented at the Singapore Governance and Transparency Forum

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SGTI Partnership

A Collaboration Between Strategic Media Partner

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SGTI Advisory Panel

Ms Rachel Eng

Managing Director, Eng and Co LLC

Mr Loh Hoon Sun

Senior Advisor, Phillip Securities Pte Ltd

Mr Low Weng Keong

Past Global President & Chairman of the Board, CPA Australia

Mr Chaly Mah

Chairman (Retired), Deloitte Singapore Chairman, Singapore Accountancy Commission

Mr Wong Wei Kong

Editor, The Business Times

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Corporate Governance Milestones

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2009 2012 2016 2017 2018 2019 Revised Code of Corporate Governance (2nd review) Governance & Transparency Index (GTI) launched SGTI Introduced SGTI extended to REITs and business trusts Revised Code of Corporate Governance (3rd review) Code 2018 comes into effect in 2019

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SGTI Assessment Coverage

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Excluding 123 companies:

General Category (578) REITs & Business Trusts (46)

Excluding 1 REITs & business trusts:

14 newly listed
30 secondary listings
8 funds
60 suspended from trading
1 not released report for 2 years
10 delisted
1 newly listed

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SGTI Framework – General Category

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B.R.E.A.D Base Score (100 points) Board Responsibilities (35 points) Rights of Shareholders (20 points) Engagement of Stakeholders (10 points) Accountability & Audit (10 points) Disclosure & Transparency (25 points)

Adjustments for Bonus & Penalty (43 points)

+ =

Overall SGTI Score (143 points)

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Mean Score Trend – General Category

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33.9 33.5 31.5 34.9 38.0 42.1 47.6 49.7 52.3 56.3 59.3

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

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8

20

20 40 60 80 100 120 140 160

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10

10 20 30 40 50 60 70 80 90 100 110 120 130 140

Number of Companies Company Score

2017 2018 2019

Company Score Distribution

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Sectional Scores

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53% 64% 30% 71% 53% 56% 69% 38% 74% 58% 57% 72% 53% 76% 58%

Board Responsibilities Rights of Shareholders Engagement of Stakeholders Accountability & Audit Disclosure & Transparency

B.R.E.A.D Score by Percentage

2017 2018 2019

Accountability & Audit

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Board & Director Appraisals Shareholders’ Information & Participation Sustainable Policies & Practices Committee Composition & Internal Controls Director Tenure

Key Findings – General Category

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Board Responsibilities Rights of Shareholders Engagement of Stakeholders Accountability & Audit Disclosure & Transparency

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Board Responsibilities:

Board & Director Appraisals

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77% 70% 35% 89% 87% 55% 81% 87% 49% Disclose Process For Board Appraisal Disclose Criteria For Board Appraisal Disclose Criteria For Individual Director Appraisal

2017 2018 2019

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Rights of Shareholders:

Shareholders’ Information & Participation

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63% 79% 60% 55% 84% 62% 64% 92% 88%

Disclose Related Party Transactions Are Fair and at Arms' Length All Directors Subject to Re-Election at Least Once Every Three Years Shareholders Approve Non-Executive Directors Remuneration 2017 2018 2019 Shareholders Approve Non-Executive Directors Remuneration All Directors Subject to Re-Election at Least Once Every Three Years

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Engagement of Stakeholders:

Sustainable Policies & Practices

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17% 25% 33% 33% 21% 36% 42% 43% 37% 70% 55% 70%

Efforts to Address Customers' Health and Safety Disclose Health, Safety and Welfare Policy For Employees Efforts to Interact With the Communities Efforts to Ensure Environmentally Friendly Value Chain

2017 2018 2019

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Accountability & Audit:

Committee Composition & Internal Controls

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62% 30% 39% 95% 66% 30% 49% 92% 65% 29% 53% 95%

All Audit Committee Members Are Independent All Audit Committee Members Are Non- Executive With Independent Chairman Internal Audit Meets Institute of Internal Auditors Standard Assurance From CEO & CFO Regarding Effectiveness of Company’s Risk Management & Internal Control

2017 2018 2019

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Disclosure:

Director Tenure

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61% 25% 76% 29% 76% 32%

Disclosure of All Directorships Held at Present and Over the Past Three Years More Than One Independent Directors Serving More Than Nine Years

2017 2018 2019

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SGTI Framework – REITs & Business Trusts

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Normalized Base Score (75 points) (B.R.E.A.D)

Board Responsibilities Rights of Shareholders Engagement of Stakeholders Accountability & Audit Disclosure & Transparency

Adjustments for Bonus & Penalty (43 points)

+ =

Overall SGTI Score (143 points) Trust-Specific Items (25 points) (S.L.I.C.E)

Structure Leverage Interested Person Transactions Competency of Trust Manager Emoluments

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Mean Score Trend - REITs & Business Trusts

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60.4 74.5

78.6

2017 2018 2019

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Choice (2%) & Removal of Trust Manager (35%) Gearing Policy (83%) & Credit Rating (35%) Reviews Significant IPTs (76%) CEO & Director Experience (37%) Disclose Base Fees (96%)

Key Findings – REITs & Business Trusts

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Structure Leverage Interested Person Transactions Competency of Trust Manager Emoluments

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SGTI 2019 - Looking Forward

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Board Structures Corporate Practices

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Board Independence

0% 24% 69% 6%

0% 10% 20% 30% 40% 50% 60% 70% 80%

0 - 24% 25 - 49% 50 - 74% 75 - 100%

Number of Companies (%) Percentage of Independent Directors

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Chairman and Director Independence

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98.7% 23% 33% 99.1% 25% 39% Board With At Least One-Third Independent Directors Chairman an Independent Director Majority Are Independent Directors When Chairman Is Non- Independent Director

2018 2019

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Independent Directors Serving More Than Nine Years

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32% 12% 1% More Than One More Than Two More Than Three

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Business Integrity

18% 22% 51% 20% 50% 52% Disclose Code of Ethics Describe Company's Anti- Corruption Programmes and Procedures Whistle-Blowing Policy With Anonymous Reporting

2018 2019

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Investor Relations

78% 71% 45% 87% 69% 46% Dedicated Investor Relations Link Group Corporate Structure Disclosed on Website Vision and Mission Statement

2018 2019

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Validation:

SGTI Ranks & Scores Shown on SGX Website

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Source: Singapore Exchange (SGX)

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Validation:

SGTI Data Used by MAS Financial Stability Review

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Source: Financial Stability Review, Macroprudential Surveillance Department, Monetary Authority of Singapore (MAS), November 2018

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1. SGTI 2019 reached all-time high scores of 59.3 (General Category) and

78.6 (REITs and Business Trusts)

2. Engagement of stakeholders notably rose to a score of 53% from last

year’s 38%. More companies adopted sustainable policies and practices.

3. However, there are areas of concerns:
Only 39% had IDs as majority on boards when chairman is non-ID
One-third (32%) had more than one IDs serving more than nine years
One-fifth (20%) disclosed code of ethics
Only 50% described company’s anti-corruption programmes and procedures
Some 52% adopted whistle-blowing policy with anonymous reporting

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Summary

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Looking forward for new corporate governance landscape:

The foundation of board structures in place
The pillar of IDs requires attention
The practices in business integrity need improvements

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