Singtel retains crown for fifth year running. CapitaLand Commercial Trust emerges as the new lead in the REITs and Business Trusts category
Persistent attempts to improve corporate governance disclosures have resulted in record-high scores recorded in the latest Singapore Governance and Transparency Index (SGTI).
Singtel topped the annual ranking in the General Category for the fifth consecutive year, while CapitaLand Commercial Trust overtook CapitaLand Mall Trust to lead the REIT and Business Trust Category.
This year’s index ranked a total of 578 Singapore-listed companies and 46 REITs and Business Trusts that released their annual reports by 31 May.
The SGTI assesses companies on their corporate governance disclosure and practices, as well as the timeliness, accessibility and transparency of their financial results announcements. It is published annually by CPA Australia, NUS Business School’s Centre for Governance, Institutions and Organisations (CGIO) and Singapore Institute of Directors (SID).
Singtel’s 2019 score of 129 points was flat from 2018 levels, but was sufficient for it to retain its top position. DBS Group retained its second position at 125 points, while CapitaLand and Singapore Exchange are catching up with their improved scores of 122 and 121 points respectively. City Developments Ltd made it to the top 5 for the first time since SGTI started, Oversea-Chinese Banking Corporation moved up three spots to the sixth position, up from the ninth position in 2018. (Please refer to Annex 1 for the top 20 results of the General Category.)
In the REIT and Business Trust Category, CapitaLand Commercial Trust overtook CapitaLand Mall Trust to clinch first place. CapitaLand Mall Trust fell one spot to number two, while Ascott Residence Trust maintained its third position. (Please refer to Annex 2 for the top 10 results of the REIT and Business Trust Category.)
Companies remain committed to achieving better corporate governance
The SGTI 2019 scores constitute base scores, bonuses and penalties awarded in accordance with corporate governance disclosure performances. Overall, the average score for companies in the General Category is 59.3, an increase of 3.0 from 2018 where the mean scores have improved consistently from 31.5 in 2011. (Please refer to Annex 3 for the overall SGTI General Category scores trend.)
Additionally, companies continued to receive greater bonuses at 8.6, up 0.9 points from 7.7 in 2018. Bonuses are awarded when companies demonstrate emerging good practices such as producing an annual sustainability report, and providing comprehensive disclosures of how the company assesses the independence of its directors.
Similar to last year’s results, the penalties awarded again also saw an increase. The penalty scores increased by 0.6 points to 10.8 this year. Penalty items reflect issues that are indicative of poor corporate governance. They are assigned on a company-specific basis and are usually event-triggered.
For the REIT and Business Trust Category, the mean score increased by 4.1 points to 78.6 from 74.5 in 2018. This indicates that REITS managers are still striving towards greater disclosure. This is evident from the continued disclosures and audit reviews of significant interested person transactions, which scored 76%. Additionally, 96% of companies disclosed the base fees of their trust managers receive, at. (Please refer to Annex 4 for the overall SGTI REIT and Business Trust Category scores trend.)
“With disruption being the new normal, corporate governance has to evolve. Achieving a high level of corporate governance is especially important as the fast-changing business landscape brings many new complexities for boards and management,” said Mr Chng Lay Chew, Singapore Divisional President at CPA Australia.
“We believe that companies have to go beyond pragmatic tokenism and compromise to truly embrace the profound changes occurring around us. And good corporate governance provides the means and the framework to do that. Good governance should be the lodestar for these times, guiding us forward towards true north, and giving companies meaningful purpose,” said Mr Adrian Chan, Vice-Chairman, SID.
The SGTI scoring system is based on a five-pronged “BREAD evaluation” metric, namely:
REITs and Business Trusts are subjected to additional guidelines such as the Code on Collective Investment Schemes to complement the existing SGTI framework. The “SLICE framework” addresses five main areas:
Notable achievements
Although SGTI’s overall performance continues to increase, results show noteworthy improvements in three areas. Shareholders’ rights and audit standards continue to improve, as well as increased stakeholder engagement.
Stakeholder engagement increased by 15 percentage points to 53%, compared to only 38% of companies in 2018. The improvement was primarily due to the 70% disclosure of health, safety and welfare policy for employees, almost doubled from 2018’s 36%, and the greater effort made by companies to ensure environmentally friendly value chains, at 70% compared to last year’s 43%.
The increased interaction of companies with their communities (55%) as well as the rise in their efforts to address the health and safety of their customers (37%) also contributed to better stakeholder engagement.
Overall, disclosure of shareholder rights also increased from by 3 percentage points to 72% on an annual basis. The increase is largely due to the greater participation by shareholders in approving the remuneration of non-executive directors, which saw a rise of 26 percentage points to 88% from 62%.
The higher disclosure in shareholders rights was also due to an increase in the number of companies abiding by the requirement for directors to be subjected to re-election at least once every three years. That practice rose by 8 percentage points to 92% this year.
The disclosure of related party transactions by companies to ensure that they are fair and at arms’ length has also recovered to 64% in 2019, after having dipped from 63% to 55% between 2017 and 2018.
Growth in the area of accountability is marginal with a two percentage point increase to 76% on an annual basis.
Under the audit category of composition and controls, 95% of CEOs and CFOs continue to provide assurances regarding the effectiveness of the company’s risk management and internal control. That, together with the four percentage point increase to 53% in meeting the internal audit standards of the Institute of Internal Auditors, are the primary reasons for the small increment in the overall performance of the accountability and audit criteria.
The limited growth in the performance of accountability is due to the relatively unchanged scores in the disclosure of whether companies have independent audit committees (65%), or audit committees with all non-executive and an independent chairman (29%).
“Since the last SGTI, the results demonstrate greater board diversity, greater independence and greater board renewal; as well as enhanced transparency in key processes such as director selection and risk management. One notable improvement is a significant surge in the extent of stakeholder engagement, possibly because this topic is now a separate and distinct Principle in the 2018 Code of Corporate Governance,” said Mr Adrian Chan, Vice-Chairman, SID.
“It is imperative for boards and management to embrace the highest standards of governance in order to meet the increasing expectations of stakeholders – not just in letter but also in spirit,” said Mr Chng Lay Chew, Singapore Divisional President at CPA Australia.
Areas requiring more improvements
While overall development is noteworthy, there is still much room for growth.
Only 29% of companies have an audit committee consisting of all non-executive and an independent chairman. That is concerning because the figure has not only remained low since 2017 but also because it has declined.
But even more pressing are the categories where growth is minimal or absent. SGTI 2019 noted that there was no overall improvement in the disclosure and transparency category (58% in both 2018 and 2019), and no real improvement in the category of board responsibilities (increase of one percentage point to 57% from 56% in 2018).
Under the category of board responsibility, SGTI 2019 witnessed a worrying six percentage point drop in the disclosure for director appraisal to 49% from 55% in 2018. Moreover, under the disclosure category, SGTI saw a 32% increase in the number of companies with more than one director serving more than nine years, from 29% in 2018.
Associate Professor Lawrence Loh, Director of CGIO, NUS Business School said, “SGTI 2019 serves as the baseline for the impending changes in the Code of Corporate Governance and listing rules. The results show that listed companies are well on track for the changes although there are specific aspects in board independence and business integrity that still require improvements. Good corporate governance is a continual journey and the Singapore corporate sector has been moving at a strong pace in the right direction.”
Please refer to Annex 5 for the scoring methodology for SGTI 2019.
For media enquiries, please contact:
Joanna CHEK Marketing and Communications Manager CPA Australia DID: +65 6671 6546 Email: joanna.chek@cpaaustralia.com.au
Jack LOO Manager, Corporate Communications NUS Business School National University of Singapore DID: + +65 6516 5556 Email: jack.loo@nus.edu.sg
Sue Anne KUEK Communications and Publications Singapore Institute of Directors DID: +65 6422 1188 Email: sueanne@sid.org.sg
About CPA Australia
Founded in 1886, CPA Australia is one of the world’s largest professional accounting bodies representing more than 160,000 members working in 125 countries around the world. CPA Australia advances its members’ interests through education and knowledge exchange, the development of professional networks, advocacy in relation to policy, standards and regulation and the promotion of value of CPA Australia members to employers, government, regulators and the public. The world-renowned CPA designation is synonymous with professional credibility and international portability. CPA Australia has been operating in Singapore for 64 years, having arrived in this market in 1954 under the auspices of the Colombo Plan.
For more information, please visit cpaaustralia.com.au.
About the Centre for Governance, Institutions and Organisations
The Centre for Governance, Institutions and Organisations (CGIO) was established by the National University of Singapore (NUS) Business School in 2010. It aims to spearhead relevant and high-impact research on governance and sustainability issues that are pertinent to Asia, including corporate governance, corporate sustainability, governance of family firms, state-linked companies, business groups, and institutions. CGIO also organises events such as public lectures, industry roundtables, and academic conferences on topics related to governance.
NUS Business School is known for providing management thought leadership from an Asian perspective, enabling its students and corporate partners to leverage global knowledge and Asian insights.
The School is one of the 17 Faculties and Schools at NUS. A leading global university centred in Asia, NUS is Singapore’s flagship university, which offers a global approach to education and research, with a focus on Asian perspectives and expertise. Its transformative education includes a broad-based curriculum underscored by multi-disciplinary courses and cross-faculty enrichment. Over 38,000 students from 100 countries enrich the community with their diverse social and cultural perspectives.
For more information, please visit bschool.nus.edu.sg, or go to the Think Business portal, which showcases the School’s research.
About Singapore Institute of Directors
The Singapore Institute of Directors (SID) is the national association of company directors. Formed in 1998, it promotes the professional development of directors and corporate leaders. Its membership comprises mainly directors and other professionals who work in the field of corporate governance.
The SID has a comprehensive training curriculum that covers the spectrum of professional developmental needs of directors including thought leadership on corporate governance and directorship issues. It also provides its members with value-added services such as regular networking events and socials, a board appointment service, and a one-stop information service on governance-related matters.
For more information, please visit www.sid.org.sg.
Annex 1
Singapore Governance and Transparency Index 2019 General Category
Table 1: SGTI 2019 General Category Top 20 Results Source: Centre for Governance, Institutions and Organisations, NUS Business School
SGTI2019
SGTI2018
Rank 2019
Rank 2018
Company Name
Base Score
Bonus
Penalty
Overall Score
1
SINGAPORE TELECOMMUNICATIONS LTD
94
35
0
129
2
DBS GROUP HOLDINGS LTD
90
125
89
124
3
CAPITALAND LTD
28
122
93
25
118
4
SINGAPORE EXCHANGE LTD
27
121
95
23
5
7
CITY DEVELOPMENTS LTD
31
117
88
6
110
9
OVERSEA-CHINESE BANKING CORPORATION LTD
115
86
108
SATS LTD
96
22
114
SEMBCORP INDUSTRIES LTD
24
92
113
8
UNITED OVERSEAS BANK LTD
111
109
10
SINGAPORE PRESS HOLDINGS LTD
11
17
GLOBAL INVESTMENTS LTD
80
26
106
77
100
12
TUAN SING HOLDINGS LIMITED
84
85
13
DEL MONTE PACIFIC LTD
104
102
14
COMFORTDELGRO CORPORATION LTD
87
19
103
15
OLAM INTERNATIONAL LIMITED
81
21
YOMA STRATEGIC HOLDING LTD
18
98
43
GUOCOLAND LTD
101
76
83
MICRO-MECHANICS (HOLDINGS) LTD
79
20
97
STARHUB LTD.
VICOM LTD
82
Key Highlights
Annex 2
Singapore Governance and Transparency Index 2019 REIT and Business Trust Category
Table 1: SGTI 2019 REIT and Business Trust Category Top 10 Results Source: Centre for Governance, Institutions and Organisations, NUS Business School
SGT2018
Base Score*
CAPITALAND COMMERCIAL TRUST
84.5
100.5
77.7
95.7
CAPITALAND MALL TRUST
85.5
99.5
84.1
102.1
ASCOTT RESIDENCE TRUST
85.0
98.0
74.9
88.9
CAPITALAND RETAIL CHINA TRUST
80.2
96.2
73.9
84.9
FRASERS COMMERCIAL TRUST
91.9
68.5
83.5
FAR EAST HOSPITALITY TRUST
80.4
90.4
67.7
66.7
BHG RETAIL REIT
75.5
89.5
74.5
ASCENDAS REAL ESTATE INV TRUST
79.4
88.4
86.7
MAPLETREE NORTH ASIA COMM TRUST
75.4
87.4
69.0
78.0
KEPPEL DC REIT
73.3
87.3
74.7
Annex 3
Graph 1: SGTI General Category mean scores trend (2009 – 2019)
Table 1: Comparison of SGTI General Category 2018 and 2019 overall scores
2018
2019
Base
SGTI 2018 Score
Overall SGTI 2018 Score
SGTI 2019 Score
Overall SGTI 2019 Score
59.0
7.7
10.2
56.3
61.6
8.6
10.8
59.3
Annex 4
Graph 1: SGTI REIT and Business Trust Category mean scores trend (2017 – 2019)
Table 1: Comparison of SGTI REIT and Business Trust Category 2018 and 2019 overall scores
12.1
4.3
69.8
14.0
5.2
78.6
Annex 5
How scoring is done
The Singapore Governance and Transparency Index (SGTI) is a joint initiative of CPA Australia, NUS Business School’s Centre for Governance, Institutions and Organisations (CGIO), and Singapore Institute of Directors. The strategic media partner is The Business Times.
The objective of the SGTI is to evaluate listed companies, including REITs and Business Trusts, on their corporate governance practices and disclosures, as well as the timeliness, accessibility and transparency of their financial results.
SGTI is a unified framework comprising two separate categories, namely the General Category and the REIT and Business Trust Category. These categories are distinct and are not to be compared directly with each other.
For the General Category, the SGTI score has two components: the base score and the adjustment for bonuses and penalties. The base score for companies contains five sections (“BREAD”): (1) board responsibilities [35 points]; (2) rights of shareholders [20 points]; (3) engagement of stakeholders [10 points]; (4) accountability and audit [10 points]; and (5) disclosure and transparency [25 points]. The aggregate of bonuses and penalties is incorporated to the base score to arrive at the company’s SGTI total score.
For the REIT and Business Trust Category, the companies are evaluated on a similar set of criteria, but with added coverage on the unique nature of their operations. The base score for REITs and Business Trusts includes: items in the base score for the SGTI (converted to 75 points) as well as trust-specific items for REITs and Business Trusts (25 points) which covers five aspects (“SLICE”): (1) structure; (2) leverage; (3) interested person transactions; (4) competency of REIT manager / trustee-manager; and (5) emoluments.
SGTI 2019 covers 578 Singapore-listed companies in the General Category as well as 46 REITs and Business Trusts which released their annual reports by 31 May 2019. The sources of information for SGTI assessment include annual reports, websites, announcements on SGXNet, and investor relations’ email responsiveness. Announcements made on SGXNet as well as in media coverage, which occurred between 1 January 2017 and 31 May 2019, have been used to update the scores.
Further information on the scoring methodology, including the full instrument, and past results may be obtained from CGIO’s website at https://bschool.nus.edu.sg/CGIO. Queries about the SGTI may be sent to cgio@nus.edu.sg. In order to maintain independence and fairness of the SGTI, reports or advice cannot be provided to individual companies.
