My focus for this posting is the composition of the Board and other specified criteria for directors.
Proposal – Board Composition
Half the board to be made up of independent directors under the following circumstances where:-
a) the chairman and CEO is the same person;
b) the chairman and CEO are immediate family members;
c) the chairman and CEO are both part of the management team;
d) the chairman is not an independent director.
Mak Yuen Teen said the whole long-winded recommendation “can be simplified to just recommending that there should be at least half the directors independent if the chairman is not an independent director” (full stop).
Based on data from the 2010 Governance and Transparency Index, it is estimated that only 14 per cent of SGX-listed companies have an independent chairman and with more than 50 per cent of all SGX-listed companies currently have less than half the board independent. The Council views that a director be deemed non-independent if he has served on the board for more than nine years. The average tenure for all independent directors is 6 years.
Given the statistics presented in paragraph above, I wish to raise again the issue of whether the Council’s proposals can be effectively carried out given our limited pool of qualified and experienced directors.
Proposal – Director with multiple directorships
The Council has decided (ie. chicken out, don’t know or just being flexible?) not to spell out an ‘ideal’ number of directorships any one director should have. (Hong Kong has suggested a limit.) But Council has chosen to delegate that responsibility to the nominating committee “to decide if a director can carry out his duties, bearing in mind his commitments”.
In my opinion, Mak Yuen Teen opines that this proposal would be inconsequential as board with directors. with many directorships. would have its nominating committee setting higher limit, vice versa. Anyway by the time we do the next review, the next Council would be able to harvest the experience of last few years in determining the ideal limit.
Proposal – Appointment of alternate director
The Council suggests that directors should avoid appointing alternate directors – except for limited periods in exceptional cases. Why? Alternate directors may not be as well-prepared nor able to perform as well as full-time directors.
This suggestion could be attributed to Mak Yuen Teen’s vigorous exchanges with Christopher Chong in Sep 2010 on Xpress Holdings’ the nominating committee endorsing the appointment of an alternate director for one of its independent directors.