The Board and Board Committees are of an appropriate size, and comprise directors who as a group provide the appropriate balance and mix of skills, knowledge, experience, and other aspects of diversity such as gender and age, so as to avoid groupthink and foster constructive debate. The Board diversity policy and progress made towards implementing the board diversity policy, including objectives, are disclosed in the company’s annual report. |
A. Explanation
This Provision is concerned with the size of an effective Board, and the importance and nature of Board diversity.
Generally, each Board should determine its own size. Some factors which the Board should consider are:
- The scope and nature of the company operations and business requirements.
- Is the Board large enough to deal with any changes to its composition and Committees (including the balance between Independent Directors (IDs) and non-independent Board members) without undue disruption?
- The Board should not be so large as to be unwieldy.
Although the Code does not specify any limits, other regulations or a company’s constitution may mandate a minimum and/or maximum Board size. For example, Section 201B of the Companies Act requires a listed company to have an Audit Committee of at least three directors, which automatically means that the Board size would be a minimum of three.
According to the 2018 Singapore Directorship Report, the most common Board size for Singapore-listed companies is six, with larger companies having more directors. The largest Board size is 18.
Providing a check on management is a key role of an effective Board. For this to happen, diversity is considered vital, for it ensures the Board avoids “groupthink” and uncritical conformity where common limitations and biases may go unquestioned. Having a diverse Board is also more likely to produce varying perspectives that can help the company deal with different stakeholders and situations.
There are, however, several dimensions of diversity, some of which are covered in this Provision:
- Skills, knowledge and experience
- Gender
- Age
- Ethnicity and culture
- Geography
- Tenure
Gender diversity is specifically mentioned as it has taken on increasing importance and visibility. In Singapore, the level of female representation on Boards is significantly below that of women’s participation in senior management and the workforce.
Age diversity is relevant because of the pervasive reach of the digital economy, and the rapid changes in the business environment that affect different age groups in varying degrees.
The Provision states that the Board is to disclose its diversity policy and the progress that has been made in achieving that policy, including objectives. This, in effect, prods Boards to be specific about their positions and actions regarding diversity.
Practice Guidance 2 suggests that the Board may charge an appropriate committee (such as the NC) with the task of setting qualitative and quantitative objectives for achieving board diversity, and of reviewing the company’s progress in achieving these objectives.
B. Practice Guidance
C. Related Rules and Regulations
- Section 145(1) of the Companies Act: Directors [Minimum number of directors to be ordinarily resident in Singapore].
- Section 201B(2) of the Companies Act: Audit Committees [Composition].
- MR 210(5)(c) and CR 406(3)(c): Directors and Management.
- MR 210(8)(d)(iii): Life Science Companies.
- MR 210(9)(e): Mineral, Oil and Gas Companies.
- MR 704(8) and CR 704(7): Appointment or Cessation of Service.
- MR 720(1) and CR 720(1): Directors and Management.
D. CG Guides
- Board Guide 2.4: Size [Board Composition].
- Board Guide 2.7: Committees’ Composition [Board Composition].
- Board Guide 2.8: Diversity [Board Composition].
- Board Guide 2.10: Renewal [Board Composition].
- Board Guide Appendix 2F: Board and Board Committees’ Composition Requirements [Board Composition].
- NC Guide 3.4: Board Composition [Nomination and Appointment Process].
- NC Guide 3.5: Board Diversity [Nomination and Appointment Process].
- NC Guide 3.9: Board Renewal and Continuity [Nomination and Appointment Process].
- NC Guide 4.2: Number of Independent Directors [Director Independence].
- NC Guide Appendix 3B-1: Board Composition and Diversity [Nomination and Appointment Process].
- NC Guide Appendix 3F: Skills Diversity [Nomination and Appointment Process].
- NC Guide Appendix 3G: Gender Diversity [Nomination and Appointment Process].
- NC Guide Appendix 3H: Sample Board Diversity Policy [Nomination and Appointment Process].
- NC Guide 5.5: Professional Development Implementation [Professional Development].
E. Related Articles
- “Perspectives from thought leaders: Revisiting board composition & roles and relationships between directors inter se and with management” by JY Pillay. (368KB)
- “The importance of inclusivity in a diverse workplace” by Darragh Ooi. (286KB)
- “The power of belonging” by Max Loh. (319KB)
- “Embracing age diversity” by Elizabeth Kong. (394KB)
- “Gender diversity across the world” by Ernest Kan. (312KB)
- “Accelerating gender diversity on Singapore’s boards” by Celia Huber & Oliver Tonby. (331KB)
- “NCs: Tips for traversing board diversity” by Amanda Huan. (296KB)
- “Expanding Horizons: Combating gender stereotypes in the boardroom” by Wong Su-Yen. (284KB)
- “Sense and sensibility in board diversity” by Lyn Boxall. (458KB)
- “Gender diversity: A mountain to climb?” by Anabelle Yip. (457KB)
- “Gender diversity: Quotas, targets and cultural mindsets” by Junie Foo. (458KB)
- “Enter the digital director” by Robert Chew. (446KB)
- “Board diversity: The international perspective” by Tan Yen Yen. (458KB)
- “Back to basics: Financial literacy for board members” by Barbara Voskamp. (446KB)
- “Gender diversity: Make it happen” by Junie Foo. (58KB)
- “Narrowing the gender gap in Singapore boardrooms” by Junie Foo. (45KB)
- “Addressing diversity: the three disconnects” by Max Loh. (376KB)
- “Dealing with diversity fault lines” by Eugene Kang. (373KB)
- “Achieving adequate and effective board diversity” by Adrian Chan. (397KB)
- “Gender diversity: Supply or demand” by Junie Foo. (267KB)