Singapore recommends board renewals, directors' independence to boost corporate governance

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Singapore-listed companies will have to enhance board independence and encourage board renewals, if the changes suggested by the Corporate Governance Council on Tuesday are implemented.

The council emphasizes on the importance of independent directors (IDs).

"IDs who can make objective judgments, without any vested interest or undue influence from interested parties, are an essential component of a well-constituted board," the council said in a statement. The council recommends at least one-third of any board to comprise IDs.

Currently, a director can still count as independent if he owns less than 10 percent of a company's shares. The Council seeks comments on the recommendation to lower the shareholding threshold for assessing director independence from 10 percent to 5 percent.

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The council is seeking public feedback on whether the nine-year rule should be a hard limit such that directors who serve more than nine years can no longer be considered as independent.

An alternative to a hard nine-year limit, which would provide some flexibility to companies, is to subject appointment of IDs beyond nine years to an explicit shareholders' vote as a SGX requirement.

In addition, the Council recommends introducing in the Code a Provision for companies to separately disclose non-controlling shareholders' votes on appointments and re-appointments of IDs who serve less than nine years.

This article was first published on January 16, 2018