SingTel breaks new ground with CEO plan

It is also to reduce to 10% the shares it can issue under a general mandate


(SINGAPORE) Singapore Telecommunications (SingTel) has proposed that its group chief executive, as a director, be subject to the same provisions as the rest of the board - once again taking the lead in raising corporate governance standards.

In addition, Singapore's biggest listed company has agreed to reduce to 10 per cent from 15 per cent the amount of shares it can issue under a general mandate - which has been a contentious issue for minority shareholders worried about dilution.

In its annual report sent to shareholders yesterday, SingTel proposes to amend its Articles of Association to subject the group CEO, as a director, to the same retirement by rotation, resignation and removal provisions as other directors. And 'such provisions will not be subject to any contractual terms that he/she may have entered into with the company'.

At present, the CEO, as a director, is subject to the same retirement by rotation, resignation and removal provisions as the other directors of the company - but this is subject to any contractual terms the person has with the company.

SingTel spokesman Chia Boon Chong declined to reveal the contract terms of Chua Sock Koong, who joined the board in October 2006 and was made group CEO on April 1, 2007.

'This alteration is to make it clear that the CEO, as a director, is subject to the same retirement by rotation, resignation and removal provisions as the other directors and that such provisions will not be subject to any contractual terms that they may have entered into with the company,' Mr Chia said. 'This is part of SingTel's policy to continually assess and improve on its corporate governance practices.'

On the share issue mandate, SingTel is asking shareholders to allow it to lower to 10 per cent from 15 per cent the number of new shares it can issue in a year.

Singapore listing rules allow companies, subject to an annual vote, to issue up to 20 per cent new shares without the need to get additional shareholders' approval, usually for the purpose of funding an acquisition or increasing capital. In Australia, where SingTel is also listed, the share issue mandate is 15 per cent.

But minorities are not happy with this as it dilutes their stake. At SingTel's past shareholders' meetings, this resolution has attracted the highest number of 'no' votes - though parent Temasek's votes have ensured it got through.

'The directors believe that a lower sub-limit of 10 per cent . . . will at present sufficiently address the company's need for flexibility to raise capital and pursue business opportunities whilst providing shareholders enhanced protection against dilution,' SingTel said.

Hugh Young, managing director of Aberdeen Asset Management, said that it is reasonable for a company to have a mandate, which is especially useful when it comes across an acquisition and may have to act fast.

'It's a question of quantum,' he said. 'We do typically vote in favour of 10 per cent - it is within our levels of comfort. Anything over 10 per cent, we are against.'

Mr Young said that his fund owns SingTel shares and has voted against the share issue mandate in the past. But he is full of praise for SingTel's latest moves on improving its corporate governance practices.

'I must not be so laudatory, but they are pretty much a paragon of virtue when it comes to corporate governance,' he said.