8 November 2022

Singapore Exchange Regulation (“SGX RegCo”) has launched a public consultation and seeks comments on its proposals to require a hard tenure limit of nine years for independent board directors (“IDs”) beyond which such directors will no longer be considered independent and to remove the two-tier voting mechanism for long-serving IDs. Feedback is also sought on the proposal to mandate the disclosure of the exact amount and breakdown of remuneration of board directors and the chief executive officer (“CEO”) of listed companies on a named basis in the annual report. The consultation will close on 17 November 2022.

The public consultation follows the publication of the SGX Corporate Governance Code Disclosure Survey Report (“Survey Report”) dated June 2022 and the statement of the Corporate Governance Advisory Committee dated 13 September 2022 (“CGAC”) made in response to the Survey Report where the CGAC recommended applying a hard tenure limit to IDs and making the remuneration disclosures of each individual director and the CEO mandatory.

Proposed hard limit of nine years on ID tenure

Currently, under the Singapore Exchange Securities Trading Limited (“SGX-ST”) Listing Rules (Mainboard) and the SGX-ST Listing Rules (Catalist) (together, “Listing Rules”), a director of a listed company will not be considered independent if he has been a director of that listed company for an aggregate period of more than nine years, unless his or her continued appointment as an ID has been approved in two separate resolutions (“two-tier vote”) by (i) all shareholders; and (ii) shareholders, excluding the directors and the CEO and their associates. A director that is not voted in as an ID through the two-tier vote can continue to serve on the board, albeit as a non-independent director.

SGX RegCo conveyed their view that decisive action must be taken to accelerate board renewal and promote board independence. This is because IDs play an important role by providing shareholders with independent views in critical areas such as financial reporting, nominations, remuneration and interested party transactions. Further, board renewal is critical for boards to remain effective in the constantly evolving market landscape.

SGX RegCo therefore proposes amendments to the Listing Rules to require a hard tenure limit of nine years for IDs, beyond which such directors will no longer be considered independent. Consequently, it is also proposed to remove the two-tier vote mechanism for long-serving IDs. Directors who serve beyond the tenure limit of nine years can continue to be appointed for future terms but must be designated as non-independent. SGX RegCo proposes setting the tenure limit at nine years, given the market’s familiarity with the nine-year rule and its alignment with the nine-year tenure limits imposed by the Monetary Authority of Singapore for IDs of Singapore-incorporated banks, insurers and real estate investment trust (“REIT”) managers.

SGX RegCo proposes to remove the two-tier vote mechanism immediately after issuing its response to the feedback received on the consultation paper and allow a one-year transition period after that date before the hard nine-year tenure limit becomes effective. This is to provide listed companies with sufficient time to find suitable ID candidates. It is proposed that at the effective date of the hard tenure limit, IDs who have served beyond the hard tenure limit must be redesignated as non-independent, regardless of whether they have been approved through the two-tier vote previously. If the proposed amendments become effective, listed companies should be minded that opportunistically exercising the two-tier vote now will not work to lock in their ID appointments.

SGX RegCo seeks comments on the following proposals:

  • the hard tenure limit for IDs, beyond which such directors will no longer be considered independent;
  • the tenure limit being set at nine years and if not, the suitable period of time to be set as the tenure limit;
  • the transition period of one year; and
  • that IDs who have served beyond the hard tenure limit must be redesignated as non-independent at the effective date of the hard tenure limit.

Mandatory disclosure of remuneration of directors and CEO

SGX RegCo observes that shareholders expect the remuneration of directors and the CEO to be linked to a companies’ sustainable, long-term value creation. Full transparency on director and CEO pay is thus necessary for investors to make informed assessments on whether there is alignment with the expectations and interests of shareholders.

Accordingly, to provide shareholders with more transparency on companies’ remuneration practices, SGX RegCo proposes to require companies to disclose the amount and breakdown of remuneration of each director and the CEO in the annual report on a named basis. This change will bring Singapore’s disclosure requirements on director and CEO remuneration in line with global standards.

It is also proposed that the same remuneration disclosure requirements contemplated for listed companies be applied to REITs and business trusts.

SGX RegCo seeks comments on whether it should require that the exact amount and breakdown of remuneration paid to directors and the CEO be disclosed in the annual report. If not, feedback is further sought on other suggestions on how remuneration disclosures can be improved.

The following materials are available on the SGX website www.sgx.com:


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