Threshold increased for candidates from private sector

Singapore

UNDER new eligibility criteria proposed by the Constitutional Commission, individuals who have held the most senior executive positions in at least 691 private-sector companies - including 94 listed companies - could run for President.

With the revised terms, presidential hopefuls must have held the most senior executive position in a Singapore-incorporated company with shareholders' equity of at least S$500 million. This marks an increase from the current criterion, where candidates must head companies with a paid-up capital of S$100 million or more.

It is also no longer enough for a person to hold the job title of chairman or chief executive officer to qualify; the Commission believes a stipulation such as "the most senior executive position in the company, however that office may be titled" would be more appropriate. This means that in each company, at any given time, there would generally be only one person who would be eligible.

"(This) would capture those who might variously be titled as CEOs, managing directors, or executive chairmen but would exclude, for instance, a non-executive chairman who might have been invited to lead the board but who does not in fact actively run the company," said the Commission.

According to BT's checks of available annual reports, listed companies that would meet the new S$500 million shareholders' equity cut-off range from heavyweights like Singtel, DBS and Keppel Corp, to emerging companies like Olam, and even homegrown names like Yeo Hiap Seng and Super Group.

Also known as shareholders' capital or shareholders' funds, shareholders' equity equates to a firm's total assets minus its total liabilities. It represents a company's net value, or the amount shareholders would receive if a business were to liquidate. In contrast, paid-up capital is the amount of money a company has received from shareholders, in return for equity.

In its report, the Commission said it favours replacing paid-up capital with shareholders' equity, since it believes this is a better proxy for a company's size and complexity.

It said: "Unlike paid-up capital, shareholders' equity reflects the company's current (and not just its historical) recorded worth. A company might have had substantial paid-up capital at its inception, but its reserves may have significantly depleted over time if its growth stagnated and liabilities accumulated."

The nine-member Commission added that the S$500 million sum was not derived through a mathematical or formulaic exercise. Instead, the figure takes into account several realities - including how potential drawdowns which the President may have to scrutinise can be huge, and so candidates must have both the financial knowledge and confidence to handle such large sums.

The report added: "In the Commission's view, companies which meet the shareholders' equity threshold of S$500 million are more likely than not to be sufficiently large and complex, such that persons who helmed these companies would likely possess the requisite technical skills, experience, and expertise in financial matters that would make them suitable candidates for the presidency."

Based on data from the Accounting and Corporate Regulatory Authority (ACRA), 691 firms met this revised threshold as at March 2016. However, the actual number is likely to be larger, since roughly 80 per cent of Singapore-incorporated companies do not file their financial statements with ACRA.

The Commission took care to indicate that there will not be a shrinking of the pool of eligible private companies. In fact, it emphasised that more companies would meet the revised threshold now, than those which met the original S$100 million paid-up capital requirement when it was first introduced in 1993. This is true in both absolute (158 firms then, 691 now) and percentage terms (0.2 per cent then, 0.23 per cent now).

As for presidential candidates from the public sector, the Commission said that if the new S$500 million shareholders' equity criteria is accepted as the new threshold, the quantitative threshold for public sector candidates should "correspondingly be adjusted to the same level".

It also proposed to remove the Accountant-General and Auditor-General from the list of public-sector offices that would automatically qualify a person for a presidential contest. It left the rest of the list intact, which comprises persons who have held the office of minister, Chief Justice, Speaker of Parliament, Attorney-General, chairman of the Public Service Commission, or permanent secretary, for at least three years.

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