A strategic move to enhance independence of directors

The ongoing consultation on proposed revisions to the Code of Corporate Governance and the SGX Listing Rules by the Corporate Governance Council (CGC) and SGX is timely, given that corporate governance practices globally have continued to evolve since the last review of the Code five years ago.

Generally, the Code is intended to be a principles-based system of corporate governance, under which SGX-listed companies should comply with the spirit of the principles or explain the different arrangements made. An important principle of the Code which is intended to strengthen board quality is the requirement for an SGX-listed company to conduct a particularly rigorous review on the independence of any independent director who has served on its Board beyond nine years from the date of his first appointment.

The Nine-Year Rule was intended to address the concern that an independent director's independence may be compromised given his familiarity with management, but a natural threshold question arises as to whether there is any magic to the nine-year tenure period.