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Back to Global Corporate Governance Trends for 2024
Crunch time on independence in Singapore
On January 11, 2023, the Singapore Exchange Regulation (SGX RegCo) removed the two-tier vote mechanism, which allowed companies to retain long-serving independent directors (IDs) who have served for more than nine years. This means that, following the 2023 financial year-end and the conclusion of the respective company annual general meetings, directors whose tenures have exceeded this threshold can no longer be deemed independent.
The November 2023 Directorship Report revealed that 20.9% of 2,209 independent directors have served for more than nine years and will need to be replaced or redesignated to comply with the new rule. Given this context, there could potentially be a scramble to appoint new independent directors in 2024.
Moving the needle on gender diversity
The report also noted that women hold 15.4% of the available independent director seats, up from 12.4% in 2021. According to SGX RegCo CEO Tan Boon Gin, women directors have filled almost 25% of the independent board seats that became available since the mandating of diversity disclosures in 2022. With the commencement of the nine-year rule, he expects at least another 300 independent director seats to become available, which presents an opportunity to move the needle on women’s representation at the board level.
Sustained focus on ESG for Malaysian firms
In June 2023, Securities Commission Malaysia (SC) and the local exchange, Bursa Malaysia, announced the roll out of a new mandatory onboarding program on sustainability for directors of its listed companies. In addition, the SC will work closely with relevant agencies to develop an environmental, social and corporate governance (ESG) toolkit for small and medium enterprises (SMEs). Its affiliate, Capital Markets Malaysia, will also be issuing a Simplified ESG Disclosure Guide for SMEs.
To improve the existing corporate governance structure of the exchange and mitigate risks pertaining to conflicts of interest, the Malaysian government will consider the establishment of a regulatory subsidiary of Bursa Malaysia. This follows a similar approach to SGX, which formed SGX RegCo to undertake all regulatory functions in 2017, as well as Japan and Brazil.