Updated,  1 March 2025, 12.40 pm

By Mak Yuen Teen

There have been comments about possible breaches of the SGX listing rules (and the Singapore Code of Corporate Governance) in the CDL saga but a failure to recognise just how badly written the listing rules are. It is not just about the rules relating to the nomination of directors, which is directly relevant to the CDL saga, but throughout the listing rulebook. As someone who regularly looks at listing rules in other markets, especially Hong Kong and Malaysia, my view is that the SGX rulebook is relatively weak in a number of areas, and often ambiguous and difficult to follow.

Take the case of Rule 210 (5)(e) which states: “(e) The issuer must establish one or more committees as may be necessary to perform the functions of an audit committee, a nominating committee and a remuneration committee, with written terms of reference which clearly set out the authority and duties of the committees.”

A plain reading of the rule suggests that an issuer can establish just one committee to perform the functions of an audit committee, a nominating committee and a remuneration committee. Otherwise, it could simply have said that “The issuer must establish an audit committee, a nominating committee and a remuneration committee…”. In comparison, the HKEX rules clearly state an issuer must establish an audit committee, a nominating committee and a remuneration committee. Bursa rules similarly state that an issuer must establish an audit committee and a nominating committee. The remuneration committee in Malaysia is covered by the Malaysian Code on Corporate Governance and based on “comply or explain”.

Therefore, I would argue that an SGX-listed issuer can form a single committee called Audit, Nominating and Remuneration Committee (ANRC) and this would be compliant with the rule. Thankfully, I have not seen it yet, but I may have now given free advice that it is possible under the rule.

It is made even more possible because what is supposed to be a “must” need only be done “as may be necessary”. So, an issuer can say it is not necessary.

Is it a must or only as may be necessary? SGX needs to make up its mind.

Further, this requirement is put under Rule 210 which starts with: “An issuer applying for listing of its equity securities on the SGX Mainboard must meet the following conditions:—”. This rule includes requirements on  matters such as shareholding spread and distribution, quantitative criteria and profit test, which apply only at the time of application of listing. So, does this requirement for committees also only apply at time of listing? Shouldn’t such a rule be in Chapter 7 on Continuing Obligations, which includes a smattering of other corporate governance requirements.  Frankly, I think the rulebook lacks coherence.

I would add two further comments here. First, I generally do not have an objection to an issuer having a combined Nominating and Remuneration Committee (NRC) as long as it fulfils the responsibilities expected of both committees. However, I have seen a case in an overseas-listed issuer where I believed the two committees were merged to deliberately sideline a director from being involved in the nomination process. This has been alleged in the CDL case but my comment is not about this case.

Second, where an issuer is not compliant with any provision in the Code of Corporate Governance, it should immediately disclose and explain why at the time of non-compliance, rather than just wait until the annual report is published (which is the current requirement). In the CDL case, if it is true that the nominating committee was not involved in the nomination process, an immediate disclosure and explanation will allow stakeholders to understand the circumstances and evaluate the reasonableness.

Let’s now look at the announcement template for the appointment of directors (Appendix 7.4.1 Announcement of Appointment). It states that an issuer must (or is that should or as may be necessary?) disclose “The Board’s comments on this appointment (including rationale, selection criteria, board diversity considerations, and the search and nomination process).”

It does not say that the views of the NC should be provided. Like most issuers, CDL has stated the NC’s recommendation for appointments of directors – except for the appointment of the latest two independent directors. For example, for the appointment of Wong Su Yen, it states: “The Board had approved the appointment of Ms. Wong Su Yen as an Independent Non-Executive Director of the Company. Ms. Wong has extensive expertise in business strategy, organisational transformation, human capital, and leadership development, with over 30 years of experience across diverse industries including high-tech, financial services, professional services, education, retail and the public sector. Ms. Wong’s appointment would enhance the Board’s core competencies in human resource management, strategic planning and leadership and management, as identified in the Board’s skills matrix, and would also help to fulfil the Board diversity targets.”

There is no mention of the NC. In contrast, for the last director appointment involving Mr Tan Kian Seng in March 2023 (who has since resigned), it states: “Pursuant to the Nominating Committee’s (“NC”) recommendation, the Board has approved the appointment of Mr Tan Kin Seng…”. It did likewise for earlier appointments.

This gives the strongest hint that the NC was not involved in the appointment of the latest two independent directors. I would add that there are situations where there may actually be no NC or the nominating process is broken because SGX allows issuers to be temporarily without any IDs, which means executive directors, senior management or the controlling shareholders can end up managing the nomination process in such situations.

There may also be situations where a Board may have to overrule the NC, for example if it believes the NC is compromised. After all, we have cases of convicted directors and at least one suspended lawyer appointed as director, who serve on NCs of listed issuers here – although in such cases, both the NC and the Board would be compromised. In any case, it is the Board which makes the final decision as to who should be appointed as directors and for shareholders to then elect them.

Note that even though the appointment template states that issuers should disclose the “search and nomination process”, the announcement of the appointment of the two new independent directors only mentioned their appointment, expertise and experience, and how they enhance the Board’s core competencies and help fulfil the Board’s diversity targets. This only explains why the directors were selected but does not say how they were identified – that is, there is no mention of the search process. I have criticised SGX in the past for not enforcing the requirement to disclose the search process. If it does, perhaps we may discover that many independent directors were found on the golf course. It is disappointing that SGX is not doing its part to require issuers to be transparent about the search process, which can help to push more issuers to cast the net wider when searching for directors.

One suggestion I have for the Review Committee is to ask SGX to rewrite the rulebook to reduce the cost of compliance because trying to interpret the rules may require issuers to seek expensive advice. Further, the way certain rules are written makes them difficult to enforce. SGX also often does not enforce the rules even when they are clear and the Review Committee should remind SGX to do its job. Or take that job away from SGX.

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The writer is a corporate governance advocate who is fearful of investing in SGX-listed issuers. The views in this article are his personal views.