The Monetary Authority of Singapore (MAS) is seeking feedback on a number of proposals aimed at improving the governance of real estate investment trusts (Reits).
Two of the proposals are to "require" the disclosure of:
(1) the remuneration of each individual director and chief executive of the Reit manager on a named basis; and
(2) the remuneration of at least the top five key executive officers of the Reit manager on a named basis in bands of S$250,000.
It's interesting that the first proposal, on directors and the CEO, does not specify the level of detail that is required, while the second one, on key executives, specifies bands of S$250,000. Does this mean that the Reits may be able to disclose their directors' remuneration in bands of S$500,000, for example? One would think that the disclosure requirement for more senior personnel would be more stringent.
The Code of Corporate Governance for listed companies in Singapore sets the disclosure bands for directors at S$1,000. Maybe the same standard should apply to Reit managers.
This actually raises the issue of mandatory compliance. The plan is to place the disclosure requirements in the Code for Collective Investment Schemes, a non-statutory document of recommended best practices. Reit managers will presumably be inclined to follow the code, even though they do not strictly have to, because MAS takes into consideration compliance with the code when deciding whether to recognise the Reit. Which is great, right? Except that such a lever doesn't exist with the Code of Corporate Governance, which also lacks statutory backing and isn't really a condition for any kind of regulatory legitimacy. The Code of Corporate Governance, by the way, applies to all listed companies.
Without teeth, compliance with a code of conduct can be spotty. A Business Times analysis in April ("Companies selective on governance restrictions" by Kara Quek and Jaira Koh) showed that only 64 per cent of Mainboard companies and 24 per cent of Catalist issuers followed the recommendation to disclose directors' remuneration to the nearest S$1,000.
Maybe it's worth thinking about giving the Code of Corporate Governance some bite.