13 years ago, I published the article below on lawyers serving on boards as independent directors. In that article, I compared the practice in Australia and Singapore.
In Singapore, it is not uncommon to find lawyers serving as independent directors of companies while their law firms provide legal services to the same companies. Based on my observation, the situation may have become worse since I wrote the article. Such a practice exists in some well-known GLCs too. Yes, it is fully disclosed and “explanations” are provided but those explanations cut little ice with me.
Some lawyers have expressed concerns about this practice to me. One partner of a law firm which is part of a global firm shared that since they became part of a global firm, they are not permitted to sit on the board of any for-profit company – not just of a client company. I have met directors who serve on HK boards expressing bewilderment to me that this is such a common practice in Singapore. In HK, the criteria for determining independence of a director are in the listing rules, and it would be very unusual, if not unheard of, for such a situation to occur for HK listed companies, according to these directors.
I asked a US lawyer turned investor about the practice of lawyers serving on US boards. He shared that this has become relatively rare. He even suggested that having a a lawyer serving as a director may actually increase the potential legal risk for the company – as litigants may claim that the board should be well apprised of the rules.
I hope to revisit this issue in the coming months through a proper study of how prevalent is the practice of lawyers serving as independent directors while their firms provide legal services to the company. I think this practice is a blot on Singapore’s corporate governance.
