AFTER earnings for Singapore's listed companies dropped some 87 per cent during their fourth quarter, analysts suggest that they could plunge even further. Given the state of the global economy and the continuing financial storm, few would bet against this view.

The layoffs have already started, and where companies are not cutting jobs, they are cutting wages. But one of the biggest components of labour costs is senior executive salaries and perks. In some companies, they account for about a third of total remuneration, even though the people drawing these sums account for less than 5 per cent of the staff. Yet, while there has been a lot of talk about cutting labour costs, there has been very little discussion on how this critical high-end component of costs is going to be managed.

Financial releases and annual reports here have traditionally given very sparse and fuzzy information about the remuneration and rewards paid to top executives. Information is given in band-width format, instead of specific and individual numbers. Still, there is little reason to believe that there is widespread abuse, as has been the case in the US. It has become something of a scandal that executives at Merrill Lynch, which was taken over by the Bank of America, received US$3.6 billion in year-end bonuses, despite posting US$15 billion in losses during its fourth quarter. Likewise, the public is aghast that nearly bankrupt General Motors' chief executive Rick Wagoner was paid US$5.4 million last year, even as his company lost US$30.9 billion.

While there is no evidence that such abuses are rampant in Singapore and elsewhere among Asian corporates, measures must be put in place to prevent abuse in the future. We need to have more transparency on compensation packages and contracts offered to top executives of listed companies. In fact, given the vagaries of the business environment, companies could go a step further - tie senior management compensation packages to the performance of their companies, over a period of time. For example, bonuses can be deposited in escrow accounts, and subsequently paid out in pre-determined progressive instalments - say, over two years - depending on the financial state of individual companies. And shareholders should have a bigger and more direct say in how their top executives are rewarded.

It will be a tough balancing act. And it will be unpopular with influential senior executives who have had their way with their boards for a long while. But the ultimate objective would be to reinstate trust in corporate management and governance - which have been in short supply of late. It would also send a positive message to thousands of employees who are being forced to take significant wage cuts because of poor decisions made by their bosses.

This article was first published in The Business Times.