Corporate governance in rude health among Singapore companies

by John Maguire08 Aug 2016
The Singapore Governance and Transparency Index (SGTI) assessments for 2016 have produced groundbreaking results, reflecting a move among Singapore’s listed companies towards a more comprehensive and holistic approach to corporate operations, though question marks remain about transparency, conflicts of interest and stakeholder engagement.
 
SGTI 2016 studied 631 listed Singapore companies, all of whom submitted reports by May 31, 2016. The SGTI arrived at an all-time high mean score of 49.7 points. The score has had an upward trend over the last five years, while the top-scoring company for 2016 had a record high of 124 points.
 
The SGTI is actually a new initiative, an enhancement of the Governance and Transparency Index (GTI), which was issued from 2009 to 2015. A key feature of the new index is its updated section on, and measurement of, stakeholder engagement. Other important categories of evaluation include corporate governance practice and disclosures, timeliness, accessibility and financial transparency.
 
The SGTI score has two components, the base score and the adjustment for bonuses and penalties. The base score covers five areas: board responsibilities, shareholder rights, shareholder engagements, accountability and audit, and disclosure and transparency. An aggregate of bonuses and penalties is incorporated into this base score to calculate the final SGTI score.
 
While the scores marked unprecedented highs, indicating that listed Singapore businesses are performing very well with corporate governance and practice, SGTI 2016 flagged several areas where performance could be improved.
 
For example, it was found that just 31.2 percent of companies disclose their policies regarding interested person transactions (IPT). The study flagged this as an area of concern regarding conflicts of interests – just 39.1 percent of companies have a policy requiring directors to abstain from participating in board discussions regarding matters on which they are conflicted.
 
Companies also generally performed poorly on stakeholder engagement, particularly regarding employee wellbeing and development. Only 26.8 percent of companies explicitly disclose policies on employee health, safety and welfare. Even fewer companies, just 12.5 percent, describe relevant training activities and development programmes undertaken by employees.
 

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