Scoring well in the Governance Index For Trusts

ON June 29, a new governance index dedicated to real estate investment trusts (Reits) and business trusts (BTs) in Singapore was launched. This index, called Governance Index For Trusts, or GIFT, was developed by Chew Yi Hong, an active investor and corporate governance researcher, and me with the help of a group of NUS accountancy honours students. It is supported by CPA Australia.

The new index has generated much interest among trusts and investors, and many trusts have written to us wanting to understand how they can do better. This article provides more detailed insights into the findings from the inaugural issue of GIFT, especially on the differences between the top 10 and bottom 10.

In the area of board matters, only five out of the 43 trusts scored 75 per cent or more, with three of these in the overall top 10. Trusts often lost points here because they do not have an independent chairman or a high percentage of independent directors (IDs), including in some cases, having directors who they consider independent but we do not because the director has served more than nine years or has significant business or other relationships with the trust, manager or controlling unitholder. Among the top 10, six have an independent chairman, while for the 10 lowest-ranked trusts, only three do, with one having an executive chairman. Trusts will also score more points if they give unitholders the right to endorse directors, and directors who failed to obtain endorsement are required to resign. Only five such trusts gave unitholders that right and two of them are in the top three.