Call to let shareholders have say on top execs' pay
SINGAPORE-LISTED companies should go beyond remuneration disclosure for top executives, and give shareholders a say on their pay.
This will ensure direct accountability by management to owners of shares, and also help companies build bench strength as opposed to having a "hero CEO", said Lee Suet Fern, managing partner of Stamford Law Corporation, at the Singapore Corporate Awards Seminar on Monday.
Speaking during a panel session, she said that from her experience on boards of overseas companies there was increased discussion on "say on pay", a movement unfolding in developed markets where shareholders have the right to vote on the pay of executives.
Singapore will have to decide whether it wants to adopt an increasingly common practice already followed by countries such as Britain, the United States and Australia, or "be Robinson Crusoe and ride far out there and be different from everybody else".
"We have given shareholders a say on non-executive compensation, primarily the independent directors. However, this is only a tiny, tiny drop in the huge ocean of corporate compensation," she said.
"We have given shareholders a say on the people who supervise, but no say on the people who actually manage, run and control the company."
Also, no board member would want to offend the CEO of a firm and vote against his remuneration package, she added.
The Code of Corporate Governance, revised in 2012, requires that remuneration of chief executives and directors be disclosed by name to the nearest $1,000, instead of the old $250,000 bands.
An analysis by The Business Times of the 50 largest listed companies late last month showed that 64 per cent of Mainboard firms and 24 per cent of Catalist firms followed this disclosure recommendation.
Those that did not comply mostly cited confidentiality and competition for talent.
Academic research had also shown that giving shareholders a say on pay had helped to narrow the remuneration gap between "hero CEOs", or very prominent head honchos, and the rest of the management team, she added.
"This has been helpful in building a team, building bench strength, and in addressing succession issues."
However, other panellists did not agree that such a move would necessarily work.
"It may have the perverse effect that shareholders, for whatever reason, refuse to compensate executives fairly, damaging the prospects of the company and deterring much-needed talent from joining the company, particularly one that is troubled," said Singapore Exchange chairman Chew Choon Seng.
Gerard Ee, president of the Institute of Singapore Chartered Accountants, said that most listed firms here were "very small" companies, which would have been exempted from such rules elsewhere in the world.
"Most of them find it a great burden to follow compliance rules," he said.