On 17 November 2023, Singapore Exchange Regulation (“SGX RegCo“) released a study titled “State of Board Diversity Disclosures of SGX-listed Issuers” (“Study“), which was co-presented by SGX RegCo and the Council for Board Diversity. The Study examined both the state and quality of board diversity-related disclosures by issuers listed on the Singapore Exchange Securities Trading Limited (“SGX-ST“) by reviewing a total of 538 SGX-ST listed issuers’ board diversity disclosures based on their latest annual reports published as of 31 July 2023. The Study also aims to identify key areas and good disclosures that can serve as guidance and examples for listed issuers to improve on the quality of their board diversity disclosures.
By way of background, under Listing Rule 710A which came into effect for annual reports for financial years commencing on or after 1 January 2022, an issuer must:
(a) maintain a board diversity policy that addresses gender, skills and experience, and any other relevant aspects of diversity; and
(b) describe its board diversity policy in its annual report, including the following:
- targets to achieve diversity on its board;
- accompanying plans and timelines for achieving the targets;
- progress towards achieving the targets within the timelines; and
- a description of how the combination of skills, talents, experience and diversity of its directors serves the needs and plans of the issuer.
Key Observations of the Study
Set out below are the key observations of the Study.
(a) A vast majority (89%) of the SGX-ST listed issuers have disclosed a board diversity policy. Of the issuers which did not disclose a board diversity policy, the majority were not yet required to do so under Listing Rule 710A for their latest annual reports. Furthermore, 98% of issuers which disclosed a board diversity policy included a description of how the combination of skills, talents, experience and diversity present among their directors serves their needs and plans.
(b) Common aspects of diversity cited are gender, skills and experience and other relevant aspects of diversity (for example, age and length of service), which were cited by 97%, 99% and 91% of the SGX-ST listed issuers which disclosed a board diversity policy. Less commonly discussed aspects of diversity include qualifications, educational background and culture.
(c) Of the SGX-ST listed issuers which have disclosed a board diversity policy:
- only 41% have disclosed their board diversity targets;
- only 21% have disclosed accompanying plans and timelines for achieving their board diversity targets; and
- only 11% have disclosed their progress towards achieving their board diversity targets.
The Study noted that this is expected as these disclosures are contingent on the targets set. Being the first year of board diversity disclosures, it was observed that many listed issuers were insufficient in their description or have only partially revealed their progress or plans for achieving board diversity targets.
(d) There is increasing scrutiny on board diversity. Investors from the Advisory Body for the Study highlighted the importance of quality board diversity disclosures that go beyond compliance with the SGX-ST Listing Rules when considering investing in listed issuers.
(e) The top 100 SGX-ST listed issuers by market capitalisation as of 31 July 2023 demonstrate leadership though their higher rates of disclosure in relation to the aspects of diversity as well as elements of a board diversity policy.
(f) The Consumer Non-Cyclicals, Real Estate and Financials sectors have the highest rates of disclosures across both the aspects of diversity as well as the elements of a board diversity policy.
Recommendations on how SGX-ST Listed Issuers can Improve Quality of Board Diversity Disclosures
The Study provides the following key recommendations and examples of how SGX-ST listed issuers can improve on the quality of their board diversity disclosures:
(a) Contextualise board diversity disclosures to their business strategy and needs, which include presenting the rationale behind the aspects of diversity cited in their board diversity policy.
(b) Have more transparency and effective communication of their existing board make-up through a skills matrix, tying back to the areas of focus within the board diversity policy.
(c) Disclose the proactive steps being taken to address gaps in their existing board mix.
(d) Set clear targets, plans, and timelines to achieve the ambitions of the board diversity policy, as well as communicate the year-on-year progress made towards achieving these goals.
Click on the following links for more information (available on the SGX website at www.sgx.com):
