SGX review finds disclosures lacking in remuneration, board performance matters

THE quality of corporate governance disclosures among mainboard-listed companies was the poorest when it came to remuneration details, assessing board performance and internal audit, according to a review carried out by the Singapore Exchange (SGX).

But the review also found that the quality gap between big and small companies was smaller than expected, and the companies on average earned a passing grade, SGX said.

SGX will engage with individual companies to help them to improve the standard of their disclosures, and will be ready to use its enforcement powers if necessary, SGX chief regulatory officer Tan Boon Gin told reporters at a briefing.

Singapore has adopted a "comply-or-explain" model for its Code of Corporate Governance. The review, which was carried out by KPMG, was undertaken to assess whether listed companies were giving meaningful disclosures about how they were complying with the Code, and if not, whether they explained the non-compliance properly.

The study looked at the annual reports for 545 mainboard-listed companies for fiscal years that ended between July 1, 2014 and June 30, 2015. Scores were awarded based on a one-third weighting for simply stating whether a requirement under the Code was followed, and a two-third weighting for the quality of the discussion relating to the various requirements.

On average, the companies achieved a 60 per cent score out of a best possible 100. KPMG described the quality of disclosures as "good with room for improvement".

"Adherence to guidelines of the corporate governance code can be improved and deviations should be better explained," SGX said in a statement, adding that disclosures on remuneration matters were most in need of improvement.

The standard of disclosure was most lacking in remuneration matters, where the average score was 53 per cent.

Companies were particularly poor at explaining how they align the level and mix of remuneration with long-term incentives and corporate and individual performance. SGX noted minimal discussion on whether experts were consulted on remuneration policy, whether there were termination clauses, long-term incentives or mechanisms to reclaim incentives.

Companies were also reluctant to disclose details about how much they paid key personnel, mostly rejecting the level of resolution recommended by the guidelines.

"We strongly urge companies to be more open and transparent about disclosures on director and chief executive officer remuneration for a more sustainable relationship with shareholders," SGX said.

Another principle that saw poor adherence was in the assessment of board performance. Only 21 per cent of companies achieved a score of 60 per cent and above in that area.

"Companies were also mostly silent on whether performance conditions were met for the board evaluation process; only a third of companies did so," SGX said. "We urge companies to provide more details on the board evaluation process."