THE issue of multiple directorships has cropped up again, following the arrest of the current and former Singapore-based directors of Eagle Hospitality Trust (EHT).

 

The directors in question - Lau Chun Wah @ Davy Lau, Tan Wee Peng Kelvin, Tarun Kataria, Salvatore G Takoushian, Carl Gabriel Florian Stubbe and Ng Kheng Choo - were arrested and released on bail on " reasonable suspicion" over suspected disclosure breaches.

 

A couple stood out as they also serve on other boards. Tan is also a board member of IReit Global Group, UnUsUaL and Viking Offshore, while Ng sits on the board of ISOTeam and OKH Global. Their arrest forced several of the listed companies whose boards they serve on to defend their continued appointments.

 

A few companies also had to justify the continuation of the roles of Foong Daw Ching and Foo Fatt Kah. Both are directors of Catalist-listed Ayondo, which has been asked to assist in an investigation of a possible offence under the Securities and Futures Act.

 

The merit of the cases aside, the various announcements highlight the vulnerability of the " G" element in environmental, social and governance (ESG) responsibilities facing directors in particular, the issue of overboarding.

 

In the 11th Singapore Board of Directors Survey 2019, about 30 per cent of respondents imposed a restriction on the number of listed company directorships that their executive and non-independent, non-executive directors can hold. Most capped the number at six, with larger firms more likely to impose a limit. The study also showed directors of smaller cap firms spend less time on board duties (an average of 0-10 days a year) than those serving larger firms.

 

Directors sitting on multiple boards, as well as chairs of nominating and governance committees, should seriously consider taking advantage of any rotation opportunities coming up to refocus on where they can contribute meaningfully. This is only fair to the shareholders they represent. Directors influence corporate strategy, appoint key managers and set their compensations. While some argue that sitting on multiple boards allows for best practices from one to be brought over to another, the flipside to that is these busy directors might not have the time nor the ability to contribute to every company.

 

Debate on the number of directorships is not new. It has its roots in the Sarbanes-Oxley era perceptions of how breakdowns in corporate governance contributed to major corporate scandals. Observers attributed some responsibility for those scandals to outside directors who failed to contribute sufficient time and attentiveness to their oversight obligations, in part due to the demands of other board services and similar commitments.

 

Directors' time commitments and their ability to discharge responsibilities are even more urgent with the Covid-19 pandemic.

 

When schedules are packed tightly, directors may struggle to squeeze in last-minute or emergency board meetings.

 

A study in the US noted the " explosion" in the average time commitment for board service, adding that one can " reasonably expect a director to easily average somewhere around 300 to 350 hours of work per year for complex public companies" .

 

One can expect regulated companies to clock in at the higher end of this time range, given the intensity of regulatory change and expectations - including much closer oversight of the business and enterprise risk management, not to mention increasing shareholder engagement activities.

 

In the UK, the Corporate Governance Code provides as a main principle that all directors should be able to allocate sufficient time to the company to discharge their responsibilities effectively. In relation to executive directors, " the board should not agree to a full time executive director taking on more than one non-executive directorship in an FTSE 100 company nor the chairmanship of such a company" .

 

Directors' responsibilities are certainly not abating, and the stakes for directors are clearly much greater these days. Global asset managers such as Vanguard and BlackRock take a firm position on the issue of director overboarding.

 

With the global pandemic, boards that are already busy handling normal business risks now need to focus on survival. Who knows how long this pandemic will last before a vaccine is available? There is certainly no room for a passive board member. It was hard before the pandemic, and harder now.

OVER the weekend, several Singapore Exchange-listed firms notified shareholders of investigations involving their independent directors who are also current or former directors of the troubled Eagle Hospitality Trust (EHT).

 

On Friday night, EHT' s managers said in a regulatory filing that all of its former and current Singapore-based directors were arrested and released on bail on Oct 1, on " reasonable suspicion" that disclosure requirements may have been breached.

 

Investigations are ongoing, and none of the individuals have been charged nor do the arrests necessarily mean that there will be charges, said EHT then.

 

On Saturday night, mainboard-listed OKH Global said that it had been notified about the investigation by its current non-executive independent director Ng Kheng Choo, who joined EHT' s board on Oct 8, 2019 and resigned on March 16, 2020.

 

" The board wishes to inform that the matter above is not related to the company, and the business and operation of the company are not affected by the investigation," said OKH Global, adding that as at the date of the announcement, its board is of the opinion that Ms Ng is able to continue to discharge her duties professionally as an independent director.

 

On Sunday night, IReit Global and UnUsUaL made separate announcements in relation to Kelvin Tan Wee Peng, who is an independent director on their boards as well as a current non-executive independent director of EHT.

 

Both IReit Global' s managers and UnUsUaL said that the matter is not related to their respective organisations, and that their business and operations are not affected.

 

They both also said that they were of the opinion, as at the announcement date, that Mr Tan is able to continue discharging his duties professionally as an independent director.