Time for Singapore’s biggest investors to lay out their own ultimatums for companies

OF THE many panels and discussions I attended while at the World Economic Forum in Davos, my favourite was one by the chief of Norges Bank Investment Management. Nicolai Tangen criticised the boards of large listed companies for paying their top executives too much, for failing to come up with plans to neutralise their carbon footprints, and for poor commitments to diversity.

Many boards are also chaired by the company’s chief executive, he said, while some board members sit on too many boards.

More importantly, however, Tangen laid out what Norges is doing to change this. Norges is voting at annual general meetings against boards that fall short. Starting this year, it also plans to file its own shareholder proposals.

These commitments by Norges demonstrate corporate leadership. Singapore’s largest investors should do the same.

It is tough to tell if Singapore’s corporates are behaving as egregiously in some of those areas that Tangen touched on.

The median pay of CEOs at S&P 500 constituent companies was US$15 million in 2021. Comparable figures are not immediately available for the Straits Times Index (STI), partly because CEO pay disclosure isn’t yet mandatory.

Piyush Gupta, the CEO of Singapore’s largest listed company, DBS Group Holdings, was paid S$13.6 million in 2021.

Among STI components with financial years ended Dec 31, Gupta’s pay was the highest. In second place was commodities trader Wilmar International, whose CEO Kuok Khoon Hong was paid S$11.6 million. Most other CEOs are paid much less.

On the surface, Singapore’s CEOs haven’t been as greedy as America’s.

But the S&P 500 companies are also very much larger. To be admitted to the index, a stock must have a market capitalisation of at least US$12.7 billion.

The smallest STI counters are aviation services provider Sats and data centre real estate investment trust Keppel DC Reit. Both have market caps of S$3.3 billion.

There is, however, good data on boardroom diversity. According to the Council for Board Diversity, women represented 20.8 per cent of directors on the boards of the top 100 primary-listed companies as of Jun 30, 2022.

This is below the 30 per cent threshold Norges sets for its portfolio companies. It is also below the 30.2 per cent achieved by Singapore’s statutory boards, and the 29 per cent achieved by institutions of a public character.

Singapore performs poorly on several other governance metrics.

According to a report by institutional investor EquitiesFirst and Nasdaq Governance Solutions, and authored by NUS Business School accounting professor Mak Yuen Teen, nearly half of all directors are aged 60 years or older.

Also, a survey in 2019 found that non-executive chairmen in 60 per cent of Singapore companies and independent directors in 45 per cent spent no more than 10 days a year on board duties.

In comparison, a 2015-2016 survey by the National Association of Corporate Directors in the United States reported that directors on average spent 248 hours or about one full month per year on board-related matters.

Could firmer voting positions change boardroom attitudes?

Singapore’s largest institutional investors, GIC and Temasek, have stated positions in support of factors such as board diversity and sustainability. But they do not draw hard lines, neither do they state their voting instructions transparently as Norges does.

Responding to queries from The Business Times for an article last year on sustainable investing mandates and voting positions, both state investors said they preferred a collaborative approach.

Yet, collaboration does not have to be an alternative to voting action. Norges’ Tangen said in Davos that companies inevitably approach Norges following a negative vote to learn how they can do better. And Norges has seen improvements after this happens, he added.

A show of strength from Temasek Holdings and its related entities could sway voting and improve Singapore’s overall corporate governance.

A similar signal from GIC would boost the Singapore brand of governance.