CPA Forum Spotlight on Singapore: Findings on the Governance & Transparency Index (GTI) Assoc Prof Lawrence Loh

Transcription

1 CPA Forum 2013 Spotlight on Singapore: Findings on the Governance & Transparency Index (GTI) 2013 Assoc Prof Lawrence Loh Centre for Governance, Institutions and Organisations NUS Business School 1 August 2013

2 The GTI Project Collaboration by (Sponsor) Supported by 2

3 The GTI Journey 5 years in the running First ranking published in April 2009 at CPA Forum 2009 Ranking table annually published in The Business Times Covers Singapore listed companies (27 April 2012) 3

4 GTI Advisory Panel Mr Ang Hao Yao, Director, Trader Investment Mr Andrew Kwek, Chief Operating Officer, Pheim Asset Management Mrs Lee Suet Fern, Senior Director, Stamford Law Corporation Mr Loh Hoon Sun, Managing Director, Phillip Securities Mr Chaly Mah, Chairman, Deloitte Singapore Mr Alvin Tay, Editor, The Business Times 4

5 Index Structure Base Score (Max = 100 points) Board matters (Max = 35 points) Remuneration matters (Max = 20 points) Accountability & audit matters (Max = 20 points) Transparency & investor relations (Max = 25 points) Adjustments for bonuses/penalties (+/ ) Overall GTI Score (Max = 143 points) 5

6 GTI 2013 Coverage 664 companies that released ARs for FY end 2012 For companies with Dec FY end, cut off: 31 May companies excluded: Newly listed companies that do not have full year s financial report (20) Suspended (3) Winding up/restructuring (13) Delisted (8) Secondary listing (28) Funds (5) REITS & Trusts (35) 6

7 GTI 2013 Data Sources Annual reports Company announcements: 1 Jan 2011 to 31 Dec 2012 Corporate websites Information obtained from companies via Investor Relations Media Articles: 1 Jan 2011 to 30 Apr

8 GTI Trends Mean Score GTI 2009 GTI 2010 GTI 2011 GTI 2012 GTI

9 GTI 2013 Findings: A Transformer s Guide Board Directors Induction Independence Involvement Incentive Accountability & Audit Risk Management Shareholder Engagement 9

10 GTI 2013 Findings: A Transformer s Guide Board Directors Induction Independence Involvement Incentive Accountability & Audit Risk Management Shareholder Engagement 10

11 60.0% Independence Proportion of Independent Directors on Board Percentage of Companies 50.0% 40.0% 30.0% 20.0% 27.0% 23.9% 24.9% 24.5% 25.2% 26.2% 48.8% 45.5% 44.1% GTI 2011 GTI 2012 GTI % 0.0% >50% 50% 33% <50% 11

12 Independence Leadership 40.0% 35.0% 35.2% Percentage of Companies 30.0% 25.0% 20.0% 15.0% 10.0% 14.7% 14.4% 14.8% 25.2% 29.7% GTI 2011 GTI 2012 GTI % 0.0% Independent chairman Having lead independent director 12

13 Independence 35.0% 30.0% Definition of Director Independence 32.1% 30.9% 28.6% Percentage of Companies 25.0% 20.0% 15.0% 10.0% 5.0% 4.8% 7.3% 12.8% GTI 2011 GTI 2012 GTI % From major shareholders Comprehensive description 13

14 Involvement 14.0% 12.0% Companies with Busy Independent Directors (IDs) 13.0% 11.3% Percentage of Companies 10.0% 8.0% 6.0% 4.0% 2.0% 9.5% 2.1% 2.4% 0.9% GTI 2011 GTI 2012 GTI % 2 busy IDs More than 2 busy IDs 14

15 Induction Percentage of Companies 9.0% 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% Training & Succession Disclosure 7.8% 7.4% 3.0% 1.7% 0.9% 0.2% Director training Succession planning GTI 2011 GTI 2012 GTI

16 Incentive 14.0% 12.0% Exact Remuneration Disclosure 11.6% Percentage of Companies 10.0% 8.0% 6.0% 4.0% 2.0% 4.5% 4.2% 9.8% 1.8% 1.8% 2.1% 7.4% 6.8% GTI 2011 GTI 2012 GTI % Executive directors Top 5 executives Non executive directors 16

17 Incentive 18.0% Remuneration Disclosed in Bands with No Upper Limit Percentage of Companies 16.0% 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% 15.3% 13.5% 12.5% 4.9% 3.9% 3.0% 1.8% 1.2% 0.0% Executive directors Top 5 executives Non executive directors GTI 2011 GTI 2012 GTI

18 GTI 2013 Findings: A Transformer s Guide Board Directors Induction Independence Involvement Incentive Accountability & Audit Risk Management Shareholder Engagement 18

19 Accountability & Audit 90.0% 80.0% Audit Committee (AC) Members having Accounting or Finance Background 77.6% 80.0% 79.8% Percentage of Companies 70.0% 60.0% 50.0% 40.0% 30.0% 20.0% 48.2% 51.0% 55.1% GTI 2011 GTI 2012 GTI % 0.0% Majority of AC members Chairman 19

20 Accountability & Audit Percentage of Companies 88.0% 86.0% 84.0% 82.0% 80.0% 78.0% 76.0% 74.0% 72.0% 70.0% 68.0% Availability of Whistleblowing Policy 85.8% 77.3% 75.2% GTI 2011 GTI 2012 GTI

21 GTI 2013 Findings: A Transformer s Guide Board Directors Induction Independence Involvement Incentive Accountability & Audit Risk Management Shareholder Engagement 21

22 Risk Management 12.0% Certification & Structure Percentage of Companies 10.0% 8.0% 6.0% 4.0% 9.9% 5.2% 5.9% 8.9% GTI 2011 GTI 2012 GTI % 0.5% 1.0% 0.0% CEO/CFO certification of financial statements Having a separate board level risk committee 22

23 Risk Management 90.0% 80.0% Adequacy of Internal Control & Risk Management 82.4% Percentage of Companies 70.0% 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 9.2% 12.2% 22.3% 32.4% 53.4% GTI 2011 GTI 2012 GTI % Process and framework disclosed Statement by the board or audit committee on the adequacy 23

24 GTI 2013 Findings: A Transformer s Guide Board Directors Induction Independence Involvement Incentive Accountability & Audit Risk Management Shareholder Engagement 24

25 Shareholder Engagement 120.0% Annual General Meeting Percentage of Companies 100.0% 80.0% 60.0% 40.0% 20.0% 0.0% 99.2% 99.3% 98.9% Detailed information on each item in the AGM agenda 3.2% 10.4% 12.0% Detailed information of the vote results GTI 2011 GTI 2012 GTI

26 Average Score Most common areas : Base Score GTI2011 GTI2012 GTI2013 Disclosing details of whistle blowing policy (85.8%) Annual report having statement by board or audit committee on adequacy of internal controls & risk management systems (82.4%) Board of appropriate size (72.7%) Fully independent remuneration committee (47.7%) 26

27 Bonus Average Score GTI2011 GTI2012 GTI2013 Most common areas : Comprehensive description of how company assesses independence of directors (32.1%) Definition of independence to include independence from major shareholders (12.8%) CEO/CFO certification of financial statements (9.9%) Having positive CG confirmation (9.2%) 27

28 Penalty Average Score GTI2011 GTI2012 GTI2013 Most common areas: Same independent directors sitting on nominating, remuneration & audit committees (45.3%) Non disclosure of director information pertaining to appointment & qualification (32.7%) Tenure of independent directors of more than 9 years (23.6%) CEO/MD/ED not subject to re election (20.3%) 28

29 GTI 2013 Summary State of disclosure practices have generally improved over last 5 years Average overall GTI score of companies is at all time high of 38.0 over 5 years (it seems to sustain upward trend from last year) Some companies made significant improvements in disclosure & practices but majority still have room for improvement We stand in good stead for the revised Code of Corporate Governance 29

30 On the Threshold of the New CG Code We are poised to take off Moving forward on the runway 30