I READ with interest Michelle Quah's report on a recent study done by the CFA Institute Centre for Financial Markets Integrity, which highlighted Singapore as having poor standards of executive compensation disclosure ('Asia needs to improve executive compensation disclosure: study', BT, March 3).

An interesting example of Singapore's weakness in this area was revealed in the study. The authors reported that a CEO of a listed real estate investment trust (Reit) walked away with a cool $63 million without having to improve the underlying business of the trust - simply because compensation was tied to price performance of the shares upon IPO.

Executive compensation is an important area of corporate governance. In the US, according to one study, between 1994 and 2005 the ratio of the annual median CEO pay to median production worker pay nearly doubled, from 90-to-1 to 179-to-1.

Clearly, the ongoing executive pay debate in the US has its roots in flawed compensation arrangements - which, as one Harvard academic puts it, 'is widespread, persistent and systemic'.

We should ensure proper safeguards to prevent similar problems here in Singapore. But here's a conundrum: we will never quite know how pervasive the issue is unless disclosure improves.

I firmly believe in mandatory disclosure of remuneration packages of individual key executives of listed companies. However, detractors claim that such practices could lead to a ratcheting of pay levels.

Economists have recently observed that the market for CEO compensation is inefficient - and it does not operate like the labour markets for other talents. Therefore, it is unlikely that any disclosure of compensation could adversely impact an already ill-functioning market.

Perhaps it is time for the authorities to slay the last of the sacred cows. This can only strengthen the checks and balances - and, more importantly, position Singapore as truly having world-class corporate governance standards.

Ganesh Pillai
Singapore

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