SATS, one of the world’s largest air cargo handlers, has topped the Singapore Governance and Transparency Index (SGTI) for the second year running.
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Keppel and Singtel – which both tied in fourth last year – came in second and third respectively this year, while Jardine Cycle & Carriage and DBS climbed up to the fourth and fifth top spots.
The index scores Singapore Exchange (SGX)-listed firms – out of 100 points – on their corporate governance disclosures across five criteria: board responsibilities (35 points), shareholder rights (10 points), environmental, social and governance (ESG) practices (20 points), accountability and audit (10 points), and transparency (25 points).
To arrive at the aggregate total score, bonus points are awarded to recognise exceptional practices, while points are deducted for lapses in disclosures.
The annual study – in its seventeenth edition this year – saw overall performance of Singapore-listed firms and trusts in the general category reaching an all time high of 70.9 points, slightly up from 69.3 points the year before.
Under its separate real estate investment trusts (REITs) and business trusts category, the mean score stood at 90.2 points – higher than the 86.6 points in 2024. Three CapitaLand-related entities ranked among the top three in the category.
Companies in both categories showed the strongest performance in shareholder rights, followed by ESG matters as well as accountability and audit. However, the performance of Singapore-listed firms continues to lag in terms of board responsibilities and transparency in disclosures.
Image: Gabrielle See/ Eco-Business
In particular, Lawrence Loh, director of the Centre for Governance and Sustainability at the National University of Singapore (NUS) Business School, who authored the latest report, said disclosures around the mechanisms for appraising the chief executive officer and interested person transactions – referring to business deals between a company and a person with existing ties to it – remain weak.
The study has also found a “distinctive size effect”, where larger listed issuers, especially those in the financial and real estate sectors, tend to perform better than their peers, said Loh.
This finding has led some to question if the SGTI reflects genuine corporate governance performance, or simply the resources firms have to make detailed disclosures.
“How many of these awards are being given [to firms that] can afford very good third-party service providers to help [them] do the reporting?” asked Stefanie Yuen Thio, joint managing partner of Singapore-based law firm TSMP Law.
Thio, who was appointed a member of the Monetary Authority of Singapore’s Corporate Governance Advisory Committee and chair of the sub-committee reviewing its code of corporate governance in May, said that small business owners currently have too many obligations.
SGX Regulation (SGX RegCo) currently requires an issuer’s board to have at least two independent directors. Typically, the smaller- and medium-sized businesses just appoint one accountant or ex-banker and one lawyer to comply with these rules. “But those people are not well-equipped to deal with cybersecurity, sustainability and ESG,” said Thio.
She was speaking on a panel at the launch of the study’s results on Wednesday.
In response, Michael Tang, SGX RegCo’s executive director and head of listing compliance, who was also a panellist, said that directors are not expected to be experts in all emerging areas, but to give a “holistic perspective” to the management of a company on what it should prioritise to drive value creation.
Tang added that the correlation between value creation and corporate governance scores is an important one to clarify moving forward, especially as SGTI plans to incorporate shareholder value metrics from 2026 onwards.
Financial metrics to be added from 2026
To move towards a “market-centric” index, NUS Business School’s Centre for Governance and Sustainability is proposing for financial value-related metrics, such as return on equity, net profit margin and dividend yields, to make up 25 per cent of the overall SGTI scores. The proposed model is currently open for public consultation until end-September.
Thio, however, cautioned against only using purely financial metrics that favour already profitable companies, at the expense of those in high-growth, emerging sectors that might currently be loss-making. “If you only reward those metrics, then I think you will not be encouraging those companies to come.”
Mak Yuen Teen, professor of practice and director of the Centre for Investor Protection at the NUS Business School, told Eco-Business that “while governance should affect long-term financial performance, it shouldn’t be conflated with short-term performance.”
Mak, who was involved in developing the SGTI nearly two decades ago, said that the upward trending scores in recent years suggest “score inflation over time”.
“It gives a misleading impression of the quality of corporate governance, which I think does more harm than good,” he said.
“Look at the scores when I started it [in 2008]. Only six companies had a score of 70 and above. Now the mean is 70? Has our corporate governance improved so much?”
SGTI’s limitations
Notably, real estate giant CDL, which was ranked second on the SGTI last year, dropped off the top 10 performers list for the first time in nine years. CDL Hospitality Trusts, which also came in second in the REITs and business trusts category last year, has also fallen off the top five.
In February, CDL saw a boardroom tussle which centred around allegations of impropriety over the nomination process for directors.
The CDL saga reveals how “the SGTI captures disclosure rather than substance,” said Mak. “CDL said all the right things about their corporate governance and so they did well. But how independent and effective the board was, for example, will not be captured.”
“Whenever SGTI is mentioned in any meetings as a barometer of corporate governance here, I always urge strong caution in using the scores. Unfortunately, many issuers and others just accept the scores and rankings without understanding how they are derived.”
CDL declined to comment on this year’s SGTI rankings.
In response to Eco-Business’ queries, Loh refuted that CDL’s fall from grace pointed to limitations of the index.
“Last year’s assessment was based on the publicly disclosed information in the last year of review. This year, of course, a lot of information was exposed in the public domain,” said Loh. The revelations may have contributed to CDL’s lower score this year, which would have cascading effects on its hospitality trusts, he added.
The property firm’s long-time board member Philip Yeo, a veteran civil servant, stepped down from his position last month after two of the independent directors whose appointments he disputed were reappointed by an overwhelming majority of shareholders at the annual general meeting in April.
According to media reports this week, Yeo has since been roped into a new corporate governance body being set up by Mak as an alternative to the currently dominant Singapore Institute of Directors (SID) – one of the entities behind the SGTI study.
