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By Chew Xiang
A survey of 60 of the biggest companies listed in Singapore has found that top executives were paid slightly more in fiscal 2008 than the year before, but disclosure and governance standards continue to lag those elsewhere.
Ernst and Young (E&Y) surveyed 100 companies listed here but could only analyse data for 60 of them, said Julia Smith, E&Y's Singapore performance and reward practice leader.
Some were excluded because they were secondary listings - for instance, the Jardine group of companies. But many had to be removed because the data they reported was too sparse to be analysed. In many cases, annual reports aggregated payments to senior management that could not be disentangled, Ms Smith said.
While executives received an average salary increase of 10 per cent in FY 2008, Ms Smith said fewer CEOs received more than $5 million and 23 per cent of executives received no increase. On the other hand, almost 40 per cent had a raise of more than 15 per cent.
On the whole, chief financial officers were the big gainers. Some 15 per cent were paid less than $250,000 in FY 2007, but all were paid at least that in 2008. 'During tough financial times, especially when there is a shortage of cash, the CFO role becomes essential to ensuring business survival,' Ms Smith said.
Michael Hogan, a partner in E&Y's human capital practice, said there is increasing scrutiny of pay packages worldwide, especially after the G-20 summit in Pittsburgh in September. This is likely to cause companies to defer payment of short-term incentives and find ways to tie executive compensation closer to performance, he said.
Ms Smith said Singapore still appears to lag pay practices in some other jurisdictions. 'Singapore as a country doesn't use equity well,' she said, noting that while almost all the companies surveyed had some form of long-term incentive plan, just half made grants in FY 2008. The median long-term incentive was just 14 per cent of the total package, the survey found.
Among companies with long-term incentives, 59 per cent rely on stock option plans. And these can lead people to take excessive risks, as options have an asymmetric risk/return profile, Mr Hogan noted.
Companies could do a lot better in explaining to shareholders how business strategies and pay-for-performance packages feed into shareholder returns, he said.
For instance, values of share or option plans in the annual report are determined by corporate accounting standards and are unlikely to equate with the sums eventually paid out.
Ms Smith said the survey, conducted for Singapore for the first time, was carried out to identify trends and practices - and not to provide a benchmark. 'It is not designed to determine if the CEO is over or underpaid,' she said, noting that CEO pay generally correlates with company size.
This article was first published in The Business Times.
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