Companies with directors serving for more than 9 years drop to 35%: report

In 2019, 43% of firms had long-serving directors on board.

Months after the Singapore Exchange Regulation (SGX) imposed a nine-year service limit for independent directors (IDs) of listed companies, a study found that the number of firms with directors serving beyond the limit has declined to 35% from 43% in 2019.

Data from the Singapore Institute of Directors (SID) showed that small-cap firms are more likely to have directors serving beyond nine years (41%) than large-cap firms (17%).

Most companies put their long-serving IDs up for shareholders’ vote at their annual general meetings in 2022 and opt for a two-tier vote (67%).

Some appoint other directors to replace those long-serving IDs (29%), whilst few (6%) re-designate those long-serving IDs as non-independent and expand their board size.

SGX earlier said that some companies use the two-tier vote to retain long-serving directors, which in turn, could block the bourse from achieving the renewal and diversity outcomes that it seeks

According to SID, majority of firms (78%) have a board diversity policy in place, and those who do not have one are all small-cap firms (22%).

More than half of the firms also plan to increase the diversity of their boards, while 24% have no intention of doing so. The remaining 23% of respondent firms are unsure.

“The findings of the 12th Singapore Board of Directors survey provide further impetus to Singapore Exchange Regulation to push forward with our initiatives to increase board diversity and renewal. We intend to limit the tenure of long-serving independent directors, for example. This will strengthen the independence of boards. Ultimately, accountability will increase and standards will be raised,” said June Sim, head of Listing Compliance, SGX RegCo.