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The Singapore Exchange imposes a hard nine-year limit for independent directors and enhances disclosure of directors' and CEO remuneration

On 11 January 2023, the Singapore Exchange ("SGX") issued its response to its consultation on board renewal and remuneration disclosures.

SGX’s response announces the following rule changes:

  • with effect from 11 January 2023, the Listing Rules (Mainboard) ("Mainboard Rules") and Listing Rules (Catalist) ("Catalist Rules" and, together with the Mainboard Rules, the “Listing Rules”) were amended to impose a hard nine-year tenure limit for independent directors ("IDs") and the two-tier shareholder approval option (see below) was removed (Mainboard Rule 210(5)(d)(iv); Catalist Rule 406(3)(iv)).
  • starting from annual reports prepared for financial year ending on 31 December 2024, issuers must disclose remuneration paid to individual directors and CEOs by the issuer and its subsidiaries. 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 (Mainboard Rule 1207(10D); Catalist Rule 1204(10D)).

Nine-year rule for independent directors

The nine-year rule for IDs has evolved over time.

  • Prior to 1 January 2022, the Code of Corporate Governance ("CCG") provided that the independence of any director who has served on the board beyond nine years from the date of his first appointment should be subject to particularly rigorous review. In doing so, the board should take into account the need for progressive refreshing of the board. As the CCG is subject only to a “comply or explain” regime, many listed companies tended not to abide by this provision and directors maintained their independent status even though they had been serving for more than nine years.
  • From 1 January 2022, SGX removed the above provision from the CCG. Instead, a new rule was added to the Listing Rules, the provisions of which are mandatory, which provided that a director who is subject to the nine-year rule will require approval by way of separate resolutions of (a) all shareholders and (b) all shareholders, excluding shareholders who also serve as the directors or CEO of the issuer, and associates of such directors and CEO, in order to continue his appointment as an independent director.

The introduction of the two-tier vote system in the Listing Rules on 1 January 2022 was intended by SGX RegCo to be used sparingly by companies to retain quality IDs beyond nine years. Unfortunately, a survey conducted by KPMG revealed that, in practice, 70% of 391 long-serving IDs seats up for re-election were put to the two-tier vote. Furthermore, for the 172 long-serving ID seats not due for re-election, 73% were put up for re-election via the two-tier vote in any event. Following these findings, SGX RegCo launched a consultation on imposing a hard tenure limit for IDs, and subsequently imposed a hard nine-year tenure limit for IDs (see above).

Disclosure for remuneration matters

The CCG currently provides that listed companies must disclose in its annual report the policy and criteria for setting remuneration, as well as names, amounts and breakdown of remuneration of each individual director and the CEO.

As mentioned above, the CCG is subject only to a “comply or explain” regime. The KPMG survey revealed that:

  • Most companies continued to report remuneration of directors and CEOs in bands. Very few companies disclosed director (35%) and CEO (18%) remuneration in dollar value.
  • Disclosures on how remuneration was determined were mostly high level, and companies often did not explain how remuneration, performance and value creation were related. The explanation typically given for such limited disclosure was competitive and confidentiality concerns.

In its press release, SGX RegCo stated that the remuneration details of directors and the CEOs should be transparent as they owe fiduciary duties. It, therefore, launched a consultation on requiring the actual remuneration of directors and CEOs to be disclosed under the Listing Rules, and subsequently imposed a requirement for issuers to disclose remuneration paid to individual directors and CEOs by the issuer and its subsidiaries (see above).


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