Nine-year rule for IDs - an elegant solution

PERHAPS the most controversial rule in the recent corporate governance changes has been the strengthening of the "nine-year rule" for independent directors.

Essentially, the revised rule to be enshrined in the Singapore Exchange listing manual, states that companies intending to appoint independent directors beyond nine years are required to have the independence of those directors approved by a two-tier voting process of (1) all shareholders and (2) shareholders excluding the CEO, directors and their associates.

The Singapore Directorship Report 2018 by the Singapore Institute of Directors reported that the average tenure of independent directors is 7.3 years and 37 per cent of independent directors have served for more than nine years. Furthermore, 289 out of 523 SGX-listed companies which have been listed for more than nine years have at least one independent director who has served more than nine years.