Singapore Institute of Directors’ meaningless findings

I refer to the Straits Times reports:

• Busier is better for board directors, 5 Nov 2014
• Gaps in ‘busy directors’ study, 8 Nov 2014
• No claim of ‘busy’ board directors as role models, 18 Nov 2014

The Singapore Institute of Directors’ supposedly remarkable finding that directors with more board seats achieved better board meeting attendances is not only unremarkable but meaningless without controlling for other factors.

This was pointed out by Dr Mak Yuen Teen who suggested that those with better attendances could have had less board meetings to attend.

This was in turn refuted by Singapore Institute of Directors which explained that directors with six or more directorships attended more meetings per board seat than directors with just one directorship.

But Singapore Institute of Directors also revealed that the majority of directors with six of more directorships didn’t have any disclosed executive positions whereas 75% of directors with just one directorship have executive positions.

Herein lies a possible difference between directors with six or more directorships and directors with single directorships that wasn’t controlled for – executive position. An executive position or lack thereof can make a big difference to a director’s ability to juggle multiple directorships. Without controlling for this important difference, Singapore Institute of Director’s conclusion is essentially meaningless.

Straits Times, Busier is better for board directors, 5 Nov 2014

Those with many board places attend more meetings, study finds

The common belief that directors sitting on the boards of several firms are so stretched that they have poor attendance records has been undermined by a new study.

It found that that people with more board places were better at showing up at meetings than those with fewer seats.

The Singapore Institute of Directors (SID) and the Institute of Singapore Chartered Accountants (Isca) looked at 3,670 directors across 717 Singapore-listed firms. The figures were taken as at the end of last year.

The study assessed how many directors attended more than 75 per cent of their company’s board meetings. It found that 81 per cent of directors who had only one board seat achieved that attendance threshold.

That figure jumped to 91 per cent for directors who held two to four board seats, and rose to 95 per cent for those on five to seven boards.

But its most remarkable discovery was that 100 per cent of people with eight to 10 directorships turned up for more than 75 per cent of board meetings.

That finding was “surprising”, said SID vice-president Adrian Chan as he presented the results at the Carlton Hotel yesterday morning.

Mr Chan, who is also a corporate lawyer, said it signals that multiple directors in Singapore do take their jobs seriously.

However, there were fewer such multiple-seat directors to begin with, as more than 82 per cent of directors sat on only one board.

The highest number of independent directorships held by one person has also fallen – from 12 seats a few years ago to nine seats as at the end of last year.

The study results add another data point to the debate over the thorny issue of multiple directorships, which has been going on for several years.

Some industry watchers have said sitting on many boards can leave a director with too little time to properly discharge his duties, while others argue that multiple board seats can help a director gain more connections and exposure that may benefit all the boards he is on.

The study also looked at gender diversity, disclosure of director salaries and whether a board chairman is independent.

Mr Chan said boards of listed firms could improve their gender diversity and their disclosure of how much directors are paid.

The gender imbalance of board here remains severe. A survey earlier this year found that women held just 8.3 per cent of board seats in Singapore-listed firms, lower than in countries such as Australia, Britain, China and Malaysia.

SID and Isca’s study produced a similar single-digit result, finding that only 9.7 per cent of board directors were women.

The figures differed as men held more multiple directorships than women, Mr Chan noted.
The percentage of female independent directors was even lower, at 5.9 per cent, while 56 per cent of boards have no women at all.

Firms were also reluctant to disclose how much they paid their directors. Only 31 per cent disclosed the precise remuneration of directors although the code of corporate governance now demands it, SID and Isca noted.

The lack of independent chairmen was another issue. Only 18 per cent of boards had chairmen who were independent directors.

The directors in the study were from Singapore Exchange main-board-listed firms, Catalist-listed firms, business trusts and real estate investment trusts.

Straits Times, Gaps in ‘busy directors’ study, 8 Nov 2014

THE report “Busier is better for board directors” (Wednesday) seems to suggest that busy directors are somehow role models for other directors.

This is based on a study which showed that those who sit on more boards have higher qualifications and better attendance at board meetings.

There are alternative explanations for these findings.

In the case of attendance at board meetings, the study failed to set a control for the number of board meetings. Therefore, hypothetically, if a board met only once and a director attended this one meeting, the attendance would be 100 per cent.

It is possible that boards with busy directors have fewer board meetings – precisely because the directors are busy.

The study also fails to take into account situations where a director arrives late and/or leaves early, or directors who call in to participate in part of the meeting, which then constitutes “attendance”. Board meetings can also vary considerably in duration and substance. There are also issues of attendance at committee meetings and shareholders’ meetings.

More importantly, there is much more to a director’s responsibilities than just attending meetings.

A responsible director would be thoroughly prepared for meetings, be available to participate in discussions and decision-making between meetings, be available for major company events, undergo ongoing professional education, and make site visits as required – just to name a few things.

Are busy directors able to do all these things as well as less busy directors? Are busy directors more likely to be “fair weather” directors who resign when the company is in financial strife because they are too busy to give the company the necessary attention in its time of need? We should not jump to conclusions on the basis of possibly spurious findings.

Mak Yuen Teen (Associate Professor)

Straits Times, No claim of ‘busy’ board directors as role models, 18 Nov 2014

WE THANK Associate Professor Mak Yuen Teen for his feedback on the Singapore Directorship Report (“Gaps in ‘busy directors’ study”; Nov 8).

He made a fair assertion that we should be extremely cautious about making busy directors role models, by linking “busyness” with better attendance and qualifications. We note that he had, on previous occasions, raised concerns about multiple directorships. We share his concerns in general. Hence, we did not make the assertion of these directors being role models.

We are similarly cautious in drawing any conclusion that directors with multiple board seats are prone to or display certain behavioural traits, such as arriving late for and/or leaving early from board meetings, being not well prepared for such meetings, or being “fair-weather” directors who resign when the company is in financial strife.

Such behaviour could be equally applicable to any individual director, including single-seat ones. And how busy a director is would also depend on his commitments in general, in addition to holding multiple directorships.

Overall, how well a director performs or meaningfully contributes to the board very much depends on the individual, in particular his commitment, experience and professionalism. It is incumbent upon the nominating committee to take this into consideration for the appointment or re-appointment of directors to the board.

Based on the report findings, we had presented that multiple directorships do not seem to be as major a problem as is commonly perceived.

Beyond having higher qualifications and better attendance at board meetings in general, our data further showed the following for directors holding multiple board seats, in particular those with six or more seats:

These directors attended more meetings per board seat held than those holding single seats, suggesting they did not sit on a large number of boards that held a small number of meetings annually.
The majority of these directors did not have any disclosed current executive position held, compared with a fourth of single-seat directors.
These directors also seemed to have better practical experience, with a majority disclosing having had finance experience at senior management level, compared with a fifth of single-seat directors.
Further analysis of the 31 individuals who held six or more board seats indicated that they tended to be individuals who were well-respected in their respective fields, had strong experience as board directors, and were likely able to effectively contribute to the boards they sat on.

Adrian Chan
First Vice-Chairman
Singapore Institute of Directors

R. Dhinakaran
Vice-President, Institute of Singapore Chartered Accountants
and Chairman of ISCA Corporate Governance Committee

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