Governance and transparency scores up most among companies that lagged in 2020

    By RAPHAEL LIM 

    The Business Times, 4 August 2021

    COMPANIES that ranked lowest in last year's Singapore Governance and Transparency Index (SGTI) have seen greater improvement in this year's results compared to those that previously ranked higher.

    The companies that placed below the 450th position in last year's study saw the greatest improvement in their scores this year, with a mean score improvement of 1.8 points. Those ranked between 301 and 450 in 2020 saw a mean score increase of 1.6 points for 2021.

    On the flip side, companies ranking within the top 20 last year saw their scores dip 5.6 points this year. Those placed 21 to 150 last year fell the most, with mean scores down 6.8 points.

    Associate Professor Lawrence Loh, director of the Centre for Governance and Sustainability (CGS) at NUS Business School, attributed this to "closing up" efforts of lower-ranked companies in making all-round improvements.

    "It is usually harder to make improvements for the higher-ranked companies," he said, while adding that the general drop in scores for these companies is due to a multitude of factors, such as their disclosures of information or reasons in the resignations of directors and senior management.

    And although larger companies still tend to score better, the relationship between market capitalisation and SGTI scores has also become less pronounced this year.

    For the 2021 SGTI, the mean score for companies was 68.7 points - up by 0.8 and reaching an all-time high.

    Ground handler and caterer SATS retained its top spot from 2020, with a score of 128 out of the maximum of 143. Singapore Exchange jumped five positions from last year to take joint-second with Singtel, with both companies scoring 118 points.

    The study noted that a common factor among these companies is their disclosure of the process and criteria for how their board members were appraised by the committee that nominated them.

    They also performed well in disclosing the fee structures of non-executive directors and having a fully independent board-level risk committee.

    The three local banks remained among the top 10 finishers on the index.

    OCBC rose five places to finish joint fourth with City Developments. UOB moved up four places to finish sixth. DBS fell six places to finish 10th - tied with CapitaLand and Sing Investments & Finance.

    The Reits and business trusts category also saw average scores inch higher this year, rising 0.2 point to 85.

    Ascott Residence Trust, which ranked third last year, claimed the top spot, scoring 115.3 out of the maximum 143 points. Far East Hospitality Trust and Ascendas Reit also rose through the ranks to finish second and third, respectively.

    The study noted that these trusts had done well in sustainability management and also in disclosing policies on the amount of funds they could borrow to invest for higher returns. The two top performers from 2020, CapitaLand Commercial Trust and CapitaLand Mall Trust, have merged to form CapitaLand Integrated Commercial Trust, which came in fifth in the rankings this year.

    The SGTI evaluates companies based on their corporate governance practices and disclosures, as well as the timeliness, accessibility and transparency of their financial results.

    It is jointly conducted by CPA Australia, NUS Business School's CGS and the Singapore Institute of Directors (SID). The Business Times is the strategic media partner for the study.

    Under the general category, companies are scored under a "B.R.E.A.D" framework: board responsibilities, rights of shareholders, engagement of stakeholders, accountability and audit, as well as disclosure and transparency.

    Companies are given a base score, with bonus points awarded for good practices and penalty points deducted for issues that point to poor governance. Reits and business trusts are also scored against other trust-specific items in addition to the B.R.E.A.D framework.