Singapore Limits Listco Independent Directors Term to 9 Years Starting from 2024, Annual Reports to Disclose Detailed Compensation to CEOs & Directors from 2025
12th January 2023 | Singapore
Singapore Exchange Regulation (SGX RegCo) will limit listed companies & issuers independent directors term to 9 years starting from 2024, and annual reports are required disclose detailed compensation to CEOs & Directors from 2025. SGX RegCo: “Singapore Exchange Regulation (SGX RegCo) will limit to nine years the tenure of independent directors (IDs) serving on the boards of listed issuers. As transition, IDs whose tenure exceeds the nine-year limit can continue to be deemed independent until the issuer’s annual general meeting (AGM) held for the financial year ending on or after 31 December 2023. This effectively gives affected issuers more than a year to search for new IDs … … Annual reports prepared for the financial years ending on or after 31 December 2024, requires companies to disclose remuneration paid to individual directors and CEO by the issuer and its subsidiaries. SGX RegCo believes that the increased transparency will enable investors to assess whether the directors and CEO are appropriately incentivised.” See below for Singapore Exchange Regulation (SGX RegCo) and Singapore central bank Monetary Authority of Singapore (MAS) announcement.
“ Singapore Limits Listco Independent Directors Term to 9 Years Starting from 2024, Annual Reports to Disclose Detailed Compensation to CEOs & Directors from 2025 “
SGX RegCo CEO Tan Boon Gin: “SGX RegCo would like to thank the Corporate Governance Advisory Committee and the market for supporting the rules on independent directors’ tenure and remuneration disclosures. These changes provide an opportunity for companies to inject new skills, experience and knowledge into their boards, all of which will be invaluable in guiding the business for the long term. Various participants within the market community have indicated they are ready to support companies in meeting these requirements so we encourage companies to tap them when making the necessary changes.”
Singapore Minister for Social & Family Development Masagos Zulkifli: “This is an important move that will promote good governance, as well as greater diversity that strengthens boards’ decision making process. This also is in line with our action plans in the White Paper on Singapore Women’s Development, to increase the representation of women on boards. I encourage companies to use this opportunity to think actively about succession planning and refresh their boards with the right mix of board directors to best chart their path forward.”
Monetary Authority of Singapore Assistant Managing Director (Capital Markets) Lim Tuang Lee: “High standards of corporate governance, characterised by strong accountability and transparency, are critical in upholding investor confidence in our capital markets. The latest enhancements, which are in line with global best practices, are important steps to further strengthen director independence, encourage board renewal and improve market transparency.”
Singapore Exchange Regulation (SGX RegCo) Announcement
11th Jan 2023 – Singapore Exchange Regulation (SGX RegCo) will limit to nine years the tenure of independent directors (IDs) serving on the boards of listed issuers. The proposal to limit the tenure of IDs, which stemmed from recommendations by the Corporate Governance Advisory Committee (CGAC), received broad market support during a public consultation process.
As transition, IDs whose tenure exceeds the nine-year limit can continue to be deemed independent until the issuer’s annual general meeting (AGM) held for the financial year ending on or after 31 December 2023. This effectively gives affected issuers more than a year to search for new IDs.
SGX RegCo will remove with immediate effect, the two-tier vote mechanism for companies to retain long-serving IDs who have served for more than nine years. Previously, long-serving IDs could continue to be deemed independent so long their appointment was approved by all shareholders, and then by all shareholders excluding the directors and the CEO of the issuer, and associates of these directors and CEO. This mechanism was widely used by issuers to retain hundreds of long-serving IDs, inhibiting board renewal and progress on board diversity.
While concerns about competition, sensitivity and privacy were raised during the consultation, market participants largely supported the proposal for issuers to disclose the exact amount and breakdown of remuneration paid to directors and the CEO in their annual reports. This proposal also stemmed from recommendations by the CGAC.
This new rule, which will take effect for annual reports prepared for the financial years ending on or after 31 December 2024, requires companies to disclose remuneration paid to individual directors and CEO by the issuer and its subsidiaries. SGX RegCo believes that the increased transparency will enable investors to assess whether the directors and CEO are appropriately incentivised. Information to be disclosed must include base or fixed salary, variable or performance-related income or bonuses, benefits in kind, stock options granted, share-based incentives and awards, and other long-term incentives.
Issuers can consider tapping the resources or services the Council for Board Diversity, the Singapore Institute of Directors and the relevant professional associations provide to facilitate their search process for new IDs. More details on the responses to the public consultation and the new rules are found here.
Monetary Authority of Singapore Announcement
Singapore central bank Monetary Authority of Singapore (MAS) revises the Code of Corporate Governance to reflect independent director tenure limit and mandatory renumeration disclosure for directors and CEOs
11th Jan 2023 – The Monetary Authority of Singapore (MAS) today introduced amendments to the Code of Corporate Governance (Code), to reflect SGX RegCo’s Listing Rule changes to introduce a nine-year tenure limit for independent directorsPrior to the amendment, listed companies could continue to appoint a director as independent director beyond nine years, subject to a two-tier vote. and mandatory remuneration disclosure for each individual director and chief executive officer (CEO)Prior to the amendment, the exact remuneration disclosure requirement for directors and CEOs was set out in the Code of Corporate Governance, which applies on a “comply or explain” basis.
These revisions to the Code and Listing Rules are in line with the recommendations made by the Corporate Governance Advisory Committee (CGAC) on 13 September 2022, which were in response to the review of SGX-listed companies’ corporate governance disclosures released by SGX RegCo on the same daySGX RegCo had commissioned KPMG to conduct the review. The report was published on 13 September 2022. Please refer to SGX RegCo’s press release for more details.
MAS will amend the Notice to All Holders of a Capital Markets Services Licence for Real Estate Investment Trust Management (REIT Managers) (MAS Notice SFA 04-N14 ) to reflect the change in remuneration disclosure requirements for directors and CEOs of REIT Managers to mandatory from comply or explain. The amendments will take effect on 1 January 2025, in alignment with the implementation of the SGX Listing Rules requirement.
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