Singapore's trusts put in better corporate governance showing, but lapses still evident

SINGAPORE'S listed real estate investment trusts (Reits) and business trusts have continued to better their performance in terms of how they managed their governance and business risks, said the third edition of the Governance Index for Trusts (Gift) out on Thursday.

Gift is supported by the Singapore Exchange (SGX), and authored by NUS associate professor Mak Yuen Teen and active investor Chew Yi Hong.

Gift 2019 showed that the average combined governance and business risk score of the 46 listed trusts assessed has continued to improve since the first edition of Gift in 2017 - increasing from 62.2 then, to 65.6 in 2018, and to 68.0 this year.

The four new entrants to Gift - Cromwell European Reit, Keppel-KBS US Reit, NetLink NBN Trust and Sasseur Reit - generally fared well. Netlink NBN Trust, in particular, debuted on the index at the top spot this year, with its overall score of 90 putting it well ahead of all the other trusts.

More established trusts also did well. Far East Hospitality Trust, for example, showed one of the greatest improvements, gaining 15 points from last year and moving up from 29th to joint sixth this year.

But there were also disappointing developments, with several trusts displaying a regression in standards. One trust ended the practice of allowing unitholders to endorse the appointment of directors because it deemed it had complied with the requirements for half of the board to be independent and that the endorsement was no longer required by the rules; another stopped disclosing the remuneration of each individual director, the CEO and top five executive officers on a named basis, whether in exact quantum or in bands of S$250,000.

SGX Regulation chief Tan Boon Gin said that "such retrograde steps are unacceptable" and that "latitude given to listed issuers to progressively improve their corporate governance practices should not be exploited to regress to a less ideal state".

Prof Mak noted that this sector is well-regulated overall, and that many of the trusts have had good and improving governance practices over the years. "Nevertheless, there is no room for complacency as confidence in the sector can be quickly eroded if momentum is not sustained," he added.

The full report can be found at Prof Mak's website at www.governanceforstakeholders.com.