Raymond Cheung
Chartered Actuary · CRO · Board Adviser · Singapore
The Singapore Governance and Transparency Index is proposing to let financial metrics — return on equity, net profit margin, dividend yield — make up a quarter of its score from 2026. That is a bigger change to how governance gets measured than most boards have registered.
I once sat on a risk committee that turned down a reinsurance-backed growth line the CEO badly wanted written. The economics looked attractive for at least two years. We said no because the tail risk on the assumptions was thinner than management was pricing for, and it was the right call — the kind of call that shows up nowhere in a return-on-equity figure and would, if anything, have made that year's numbers look more conservative than a board that said yes. That is the tension I thought about reading that the Singapore Governance and Transparency Index is moving to a 'market-centric' model.
What is actually changing
SGTI 2026, released by CPA Australia, NUS Business School's Centre for Governance and Sustainability, and the Singapore Institute of Directors, showed small and mid-cap issuers narrowing the governance gap with the large caps — a genuinely encouraging result. Alongside it, CGS proposed that financial and stock-related indicators — return on equity, net profit margin, dividend yield among them — make up around 25% of the overall score from 2026 onward, with governance and transparency practices carrying the remaining 75%. The stated logic is reasonable: an index that only measures process and disclosure can reward boards that look procedurally immaculate while the company underperforms, and investors want to know that governance quality is actually connected to outcomes.
“Good governance and good short-term financial performance are correlated, not identical — and an index that cannot tell the difference will eventually reward the wrong boards.”
Why I am not fully comfortable with it
Financial metrics move with the cycle, sector, and capital intensity of the business in ways governance quality does not. A board that responsibly declines a leveraged acquisition, holds back a dividend to rebuild capital after a catastrophe year, or insists on more conservative reserving than the market rewards will see its ROE and dividend yield suffer precisely because it governed well. Meanwhile a board riding a strong sector tailwind can post excellent financial metrics while doing very little that resembles active oversight. Blend financial performance into the governance score at a material weighting and you risk measuring the cycle, not the boardroom.
- Boards in capital-intensive or cyclical sectors — insurance, shipping, commodities — should expect more scrutiny of how a weaker ROE or dividend year is explained, not just how it is scored
- A strong SGTI financial sub-score is not evidence of good governance on its own — directors should keep asking the process questions (challenge, independence, information flow) that the other 75% is meant to capture
- If your company's score moves mainly on the financial component next cycle, that is worth a specific board discussion, not quiet relief or quiet alarm
The index makers are not wrong that outcomes matter, and 25% is a modest weighting rather than a wholesale redefinition. But boards should read this as a signal to keep their own internal sense of governance quality separate from whatever a blended external score says in any given year — and to be ready to explain a financial dip that was, in fact, the board doing its job.
Common Questions
What is the Singapore Governance and Transparency Index (SGTI)?
SGTI is an annual ranking of SGX-listed companies on governance and transparency, jointly produced by CPA Australia, the Centre for Governance and Sustainability at NUS Business School, and the Singapore Institute of Directors. The 2026 edition was released on 5 August 2026.
What does the SGTI's proposed 'market-centric' model change?
From 2026 onward, CGS has proposed that financial and stock-related indicators — including return on equity, net profit margin, and dividend yield — make up roughly 25% of the overall SGTI score, with existing governance and transparency indicators making up the remaining 75%.
Should a board worry if its SGTI score drops because of the new financial weighting?
Not automatically. A dip driven by a deliberate, well-reasoned financial decision — capital conservation, declining a risky transaction, conservative reserving — is different from a dip caused by weak oversight. The board should be able to explain which one it is, both internally and to the market.
About the author
Raymond Cheung is a Chartered Actuary, C-suite executive and board adviser with more than 20 years of experience across Asia in risk management, insurance, ESG and corporate governance. He is the CEO of CER Consultancy and an accredited trainer at SMU Academy and the Singapore College of Insurance.