Raising the bar for directors

BOARD directors today have more challenges to contend with than their counterparts in the past.

Operating in a “BANI” world (where systems are brittle, people are anxious, cause-and-effect are non-linear, and what used to be understood is now incomprehensible), directors have a lot more to consider when making board decisions regarding risks and opportunities – with a lot less time to do so.

An increasing number of directors have also made headlines for allegedly failing in their duties.

This raises questions of whether directors are adequately equipped to discharge their duties responsibly.

Unlike in the medical, legal or most other professions, there is no equivalent mandatory qualification or certification specified by law for an individual to become a practising company director.

As such, there is no way to tell who has, or has not, acquired the necessary knowledge, skills and competencies to perform the role of a company director effectively.

Uplifting professional standards

There have been numerous efforts over the past years to raise the professional standards of company directors in Singapore.

The Corporate Governance Guides for Boards and Board Committees – a collaborative effort among regulators, professional firms and corporate governance experts – serve as a useful reference point for board practices and director duties.

Likewise research and reports such as the Singapore Directorship Report, Singapore Governance and Transparency Index and SGX Corporate Governance Code Disclosure Survey provide useful industry benchmarks and data points for boards and directors to make informed decisions.

Similarly, events such as the Singapore Corporate Awards put a spotlight on exemplary corporate governance practices with an aim to inspire boards and directors to pursue excellence in corporate governance.

Mandating director training is another effort to raise the bar.

In 2018, the Singapore Exchange Regulation (SGX RegCo) mandated that first-time directors of SGX-listed companies attend the Listed Entity Director programme conducted by the Singapore Institute of Directors (SID). This mandatory training was later extended by SGX RegCo to an alternative programme by another institution. In 2022, training in environmental, social and governance matters was mandated for all listed entity directors.

There is a growing range of professional development courses for directors, from the SID Board Readiness programme for aspiring directors to formal certification courses offered by various institutes of higher learning. These certification courses help by having a reputable third party provide written assurance that these individual directors meet basic competency requirements.

Incentives and grants can also help. Directors serving on boards of non-profit organisations can apply for funding support to attend courses such as the Governance for Outstanding Organisation Directors programme.

These efforts seek to collectively uplift the directorship profession in Singapore.

Raising the bar with professional accreditation

Accreditation goes a step further. It is the formal recognition by a standard setting body of the technical competence and conformity to specific standards of an organisation. Accreditation provides third-party assurance that testing, evaluation and certification are conducted professionally and meet globally-recognised standards.

In Singapore, the SID director accreditation programme was recently launched and comprises formal director training, a professional exam and continuous professional development requirements.

This programme was developed based on research into similar programmes overseas and adapted to the Singapore context by academics and practitioners. It was reviewed by various regulators including the Accounting and Corporate Regulatory Authority, SGX and the Charities Unit.

An independent Standards and Exams Board was set up to review the quality of the exam and set the standards. The exam tests for knowledge in director duties and practices, governance, financial, risk, strategy, human capital, digital and sustainability. To pass, candidates need to attain a minimum of 50 per cent score in all eight sections and achieve an overall 70 per cent grade.

Directors can also be accredited by attaining the Executive Diploma in Directorship from Singapore Management University or the Certificate in Corporate Governance from Insead.

However, to retain their accreditation credentials, directors have to adhere to a code of conduct and commit to continuous professional development requirements. Failure to do so, or if found by authorities to have breached their duties, will result in their accreditation being rescinded.

Different jurisdictions have adopted various pathways towards the professional development of their directorship community.

In the UK, the Institute of Directors offers the Chartered Director designation where candidates first obtain a Certificate in Company Direction, followed by a Diploma in Company Direction. Before obtaining the Chartered Director Qualification, candidates must successfully clear an interview and assessment of business experience.

With the SID accreditation programme, directors in Singapore now have a structured pathway to chart their professional development. Companies looking to refresh their board can look to the accreditation credential as a testimony of a candidate’s commitment to high corporate governance standards and continuous professional development as a director.

With this accreditation framework, public expectations of directors as proper stewards of corporate governance on boards will be elevated.

Competent directors who hold themselves to high standards now have another way to communicate their competencies and set themselves apart, thereby hopefully raising the bar for the directorship profession as a whole in Singapore.

The writer is Chair of the Singapore Institute of Directors.