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The practice of individuals holding more directorships than they can handle is not prevalent in Singapore, Senior Minister of State for Finance Chee Hong Tat said in Parliament on Feb. 14.

About 95 per cent of the directors of Singapore-listed companies hold no more than two directorships, and over 80 per cent of directors hold only one directorship, he added.

Chee was responding to a question posed by Workers' Party Member of Parliament (MP) Leon Perera about regulations on the practice of 'overboarding' in Singapore, where individuals hold more board directorships than they can responsibly handle.

Companies' Act does not limit number of directorships an individual can hold

Chee highlighted that the Companies' Act does not limit the number of directorships an individual can hold for Singapore-incorporated companies.

"All directors, regardless of the number of directorships held, are required to discharge their duties responsibly and with honesty and reasonable diligence," he said.

Those who fail to do so can face enforcement action, including disqualification and disbarment, he added.

Companies must assess ability of director if he or she holds "significant" number of directorships

Singapore-listed companies are also subject to additional requirements related to board appointments, given the public interest involved, Chee noted.

Under the Singapore Exchange's (SGX) listing rules, these companies are required to disclose the directorships and principal commitments of individuals who are either seeking to be appointed or re-elected to the firms' boards.

In addition, under the Code of Corporate Governance, if a director holds a significant number of directorships, the company's nominating committee and board are to assess the ability of the director to "diligently" discharge his or her duties, he elaborated.

Leon Perera: Research shows effectiveness goes down if one holds more board directorships

In response to Chee's reply, Perera asked if the government could be more "prescriptive" in its approach.

According to Perera, there is research which shows the more board directorships an individual holds, the less time the person can devote to discharging one's responsibilities as a director effectively.

Perera also cited international "precedents" such as the UK corporate governance code of 2018 under which a full time executive director cannot hold more than one non-executive directorship of a Financial Times Stock Exchange (FTSE) 100 company.

He also referenced law regulations in the U.S. where asset managers and institutional investors have a threshold number for the maximum number of board directorships an individual can hold before it is considered overboarding.

Individuals must devote sufficient time to discharge their responsibilities

Here, Chee responded by noting that while the UK corporate governance code limits top executives to only one FTSE 100 non-directorship, there is no such limit for chairs and non-executive directors.

However, individuals must allocate sufficient time to the company to discharge their responsibilities.

"So it's (the UK corporate governance code) similar to the requirements that we have under our listing rules," he said.

As for the U.S., Chee pointed out that the country, along with Australia and Hong Kong, does not set a limit for the number of directorships a person can hold.

"But that responsibility for the individual, the director, to be able to discharge their responsibilities diligently, I think that is common across all these jurisdictions," he said.

Top left photo via MCI Singapore/YouTube, right photo via gov.sg/YouTube