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The Chairman and the Chief Executive Officer (“CEO”) are separate persons to ensure an appropriate balance of power, increased accountability, and greater capacity of the Board for independent decision making9.
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A. Explanation
This Provision sets out the rationale for separating the position and role of the Board Chairman from that of the Chief Executive Officer (CEO).
While it is common in some jurisdictions, such as the US, for a Chairman to also serve as the CEO, it is considered best practice in Singapore (and other countries such as the UK) for the two positions to be filled by different persons.
The reason is that the Chairman and the CEO are the top positions on the Board and management respectively. The Practice Guidance explains that separating the role of the Board Chairman from the CEO avoids concentration of power in one individual, and ensures a degree of checks and balances
The separation of positions is most effective when the Chairman is also independent. This ensures an appropriate balance of power, increased accountability and enhances the independence of the Board’s oversight of management.
Where the Chairman is not independent, several regulatory requirements seek to strengthen the checks and balances on the Board:
- The relationship between the Chairman and CEO must be disclosed if they are immediate family members [MR 1207(10)(A) and CR 1204(10)(A)].
- The IDs should form the majority of the Board (Provision 2.2 of the Code) in contrast to one-third for a regular Board (MR 210(5)(c) and CR 406(3)(c).
B. Practice Guidance
C. Related Rules and Regulations
- MR 1207(10)(A) and CR 1204(10)(A): Annual Reports.
- MR 210(5)(c) and CR 406(3)(c): Directors and Management.
- MR 720(1) and CR 720(1): Directors and Management.
- MR and CR: Definitions and Interpretations (see “Immediate Family”).
D. CG Guides
- Board Guide 2.5: Board Leadership [Board Composition].
- Board Guide 2.9: Independence [Board Composition].
- Board Guide Appendix 1J: “Comply or Explain” – Examples of Non-Compliance: 2. Separation of the Chairman and CEO [Corporate Governance].
- Board Guide Appendix 2F: Board and Board Committees’ Composition Requirements [Board Composition].
- Board Guide Appendix 6B-6: Balancing the Chairman-CEO Relationship [Board Relationships].
- NC Guide 4.2: Number of Independent Directors [Director Independence].
- NC Guide 4.6: The Lead Independent Director [Director Independence].
E. Related Articles
- “One and two-tier governance” by Willie Cheng. (446KB)
- “Compliance crucial for SGX-listed foreign firms” by Eugene Kang. (66KB)
- “State of directorship in Singapore?” by Adrian Chan. (3.4MB)
- “The Executive Board Chair: Boon or bane?” by Wong Su Yen. (654KB)
- “Roles and practices of Board Chairs across the world” by Professor Stanislav Shekshnia and Veronika Zagieva. (387KB)
- “The Role and Challenges of the Non-Executive Board Chair” by Lee Chong Kwee. (145KB)