Findings on the Singapore Governance & Transparency Index (SGTI) 2017

Transcription

1 Findings on the Singapore Governance & Transparency Index (SGTI) 2017 Associate Professor Lawrence Loh Director Centre for Governance, Institutions and Organisations NUS Business School 1 August 2017 Presented at Singapore Governance and Transparency Forum, Singapore

2 Singapore Governance & Transparency Index (SGTI) A Collaboration Between Strategic Media Partner 2

3 SGTI Advisory Panel Mr Loh Hoon Sun Mr Low Weng Keong Mr Chaly Mah Mr Alvin Tay Senior Advisor Phillip Securities Pte Ltd Past Global President and Chairman of the Board CPA Australia Chairman (Retired) Deloitte Singapore Chairman Singapore Accountancy Commission Managing Editor, English/ Malay/ Tamil Media Group Singapore Press Holdings Mrs Stefanie Yuen Thio Joint Managing Partner TSMP Law Corporation 3

4 Singapore Corporate Governance Developments Governance and Transparency Index (GTI) started Singapore Governance and Transparency Index (SGTI) launched SGTI extended to REITs and Business Trusts Mar 2001 Jul May Code of Corporate Governance introduced Revised Code issued (1 st review) Revised Code issued (2 nd review) 4

5 Extending the SGTI to REITs and Business Trusts The Business Times Thursday, August 4, 2016 We are targeting to launch a ranking of REITs and business trusts by this time next year. 5

6 SGTI Assessment - Information Sources Annual reports released as of 31 May 2017 Corporate websites Company announcements on SGX: 1 Jan 2015 to 31 Dec 2016 Media coverage from 1 Jan 2015 to 31 May 2017 Responses from companies Investor Relations 6

7 General Category 7

8 General Category - Scoring Structure Base Score (Max = 100 points) Board Responsibilities (Max = 35 points) Rights of Shareholders (Max = 20 points) Engagement of Stakeholders (Max = 10 points) Accountability & Audit (Max = 10 points) Disclosure & Transparency (Max = 25 points) Adjustments for Bonuses & Penalties ( + / - ) Overall SGTI Score (Max 143 points) 8

9 General Category - Data Coverage 606 companies that released annual reports for Financial Year end companies excluded Newly-listed companies that do not have a full year s financial report (17) Companies that are listed as secondary listings on SGX (36) Company that complied with another code of corporate governance (1) Funds (9) Companies that are suspended from trading (50) Company that did not release annual report for the past 2 years (1) 9

10 Average SGTI Score Overall Trend

11 Number of Companies Score Distribution SGTI 2016 SGTI Overall Score 11

12 Standard Deviation Score Dispersion Trend

13 Key Findings Board Responsibilities Board Competencies & Appraisal Rights of Shareholders Shareholder Communication Engagement of Stakeholders Disclosure of Relevant Policies & Practices Accountability & Audit Risk Management Disclosure & Transparency Interested Person Transactions (IPTs) 13

14 Board Responsibilities Board Competencies & Appraisal 100% 80% 60% 62.9% 77.1% 57.2% 72.8% 67.4% 77.1% 51.8% 40% 30.4% 33.5% 40.9% 20% 0% Has board diversity policy Has orientation programmes for new directors Encourages directors to attend professional programmes Disclosed board appraisal process Disclosed director appraisal process SGTI 2016 SGTI

15 Rights of Shareholders Shareholder Communication 11.2% 13.2% 23.4% Analyst s briefing Presentation slides available on SGXNet/website Media briefings/ press conferences 15

16 Engagement of Stakeholders Disclosure of Relevant Policies & Practices 50% 40% 33.2% 33.2% 30% 24.6% 20% 16.8% 10% 8.7% 0% Employees' health, safety & welfare Customers' health & safety Environmentally friendly value chain Interaction with communities Anti-corruption 16

17 Accountability & Audit Risk Management 100% 80% 60% 40% 28.4% 50.5% 47.4% 56.4% SGTI 2016 SGTI % 0% Disclosure of key risks Disclosure of process and framework 17

18 Disclosure & Transparency Disclosure of IPTs 100% 80% 60% 52.1% 62.5% 40% 39.0% 41.1% SGTI 2016 SGTI % 0% IPTs are conducted at arms' length Disclosed name, relationship, nature & value of IPTs 18

19 Comparison amongst Components: The Big Cap Effect Average Score by Component Board Responsibilities (35 points) Rights of Shareholders (20 points) Engagement of Stakeholders (10 points) Accountability & Audit (10 points) Disclosure & Transparency (25 points) Big Cap Mid & Small Cap Score Difference Score Difference (% of Max Points) 17.7% 12.0% 34.0% 8.0% 21.6% Note: Market capitalisation: Big Cap more than S$1 billion; Mid Cap from S$300 million to S$1 billion; Small Cap below S$300 million 19

20 Scores by Percentile Base Score Overall Score th Percentile 50th Percentile 25th Percentile 20

21 REIT & Business Trust Category 21

22 REIT and Business Trust Category - Overview Total market capitalisation: ~S$80 billion (approximately 10% of the entire SGX) For REITs, Singapore is the third largest market in Asia-Pacific, after Japan and Australia SGTI 2017 covers a total of 42 REITs and Business Trusts (34 REITs and 8 Business Trusts) 4 REITs and Business Trusts excluded: Listed as secondary listings on SGX (1) Newly-listed, do not have a full year s financial report (3) 22

23 REIT and Business Trust Category Scoring Structure SGTI Base Score (75 points) Board Responsibilities Rights of Shareholders Engagement of Stakeholders Accountability & Audit Disclosure & Transparency Structure Leverage Trust-Specific Items (25 points) Interested Person Transactions Competency of Trust Manager Emoluments Adjustments for Bonuses & Penalties ( + / - ) REIT and Business Trust Category Overall SGTI Score (Max 143 points) 23

24 Key Findings on Trust-Specific Items Structure Leverage Interested Person Transactions Competencies of Trust Manager Emoluments Rationale for appointment of Trust/Trustee Manager (16.7%) Provisions for removal of Trust/Trustee Manager (33.3%) Gearing policy (4.8%) Balanced gearing-to-debt maturity ratio (54.8%) Significant IPTs reviewed (69.0%) IPTs on normal commercial terms (64.3%) CEO & directors with 10 years of relevant experience (9.5%) At least 3 full-time representatives with 5 years of relevant experience (78.6%) Base fees disclosed (92.9%) Methodology & amount of acquisition (92.9%) & divestment (90.5%) fees disclosed 24

25 Comparison between Categories: The Trust Effect Average Score by Component Board Responsibilities (35 points) Rights of Shareholders (Unitholders) (20 points) Engagement of Stakeholders (10 points) Accountability & Audit (10 points) Disclosure & Transparency (25 points) General Category REIT and Business Trust Category Score Difference Score Difference (% of Max Points) % -9.0% 19.0% 9.0% 20.0% 25

26 Conclusion Inclusion of REITs and Business Trusts in SGTI rounds out scope of coverage, uplifting corporate governance ecosystem in Singapore and beyond Improvement still needed even though average SGTI score for General Category is at an all-time high REITs and Business Trusts performed well with adequate disclosures but more attention required for rights of unitholders Companies reached stage where they are ready to move on to next level of accomplishment, in tandem with ongoing review of Code of Corporate Governance 26