Singapore to lift veil on CEO pay

Mandatory disclosure for listed firms could end up making execs richer, studies suggest

A market news report is shown at the Singapore Exchange headquarters on Feb 7. (Photo: Bloomberg)
A market news report is shown at the Singapore Exchange headquarters on Feb 7. (Photo: Bloomberg)

CEOs who have been grumbling about Singapore’s new mandatory pay disclosures could be in for a pleasant surprise: a raise.

The new rule adopted by the Singapore Exchange will require listed companies to disclose compensation for chief executive officers and individual company directors, inclusive of base salary and any bonuses or incentive pay, starting with the financial years ending on or after Dec 31, 2024. 

Executive pay disclosures are considered good corporate governance, a sign of more transparency and a tool for investors to scrutinise excessive pay packages. Such measures have been standard in the US, UK and EU for decades.

But research suggests that pay disclosure has done more to increase executive compensation than to suppress it. Companies face pressure to raise pay to retain top employees, with comparisons made not only domestically but internationally, according to experts. 

“The result of disclosure has been a ratcheting up in pay — companies copy the pay practices of other companies as they fear being left behind with the least able top executives,” said Alexander Pepper, professor of management practice at the London School of Economics and Political Science.

“There is little evidence that disclosure has had this desired effect” of moderating pay, he added. 

Among Singapore-listed firms, less than 40% of the 103 companies tracked by Bloomberg disclose pay. The list includes mostly mid- to large-cap companies that publicly publish ESG (environmental, social and governance) data.

Pepper highlighted the London Stock Exchange, which in 1995 began to require companies to disclose remuneration. Between 1995 and 2017, CEOs of companies in the FTSE 100 Index saw their pay rise about 10% per year, more than triple the average annual increase in UK national earnings.

Meanwhile, nine-figure paycheques are proliferating in the United States. More than 30 public-company executives took home $100 million or more at the end of fiscal 2021, according to the Bloomberg Pay Index. 

When faced with disclosure requirements, firms tend to reduce reliance on stock awards and perks as a form of compensation primarily to avoid media scrutiny, rather than reducing any overall pay package, according to a 2022 study led by researchers at the University at Buffalo School of Management.

“Boards significantly adjust the mix of compensation awarded by reducing the sensitivity of CEO pay to equity price changes, particularly when the CEO is likely to garner media scrutiny,” the authors wrote.

While the biggest financial firms in the city-state already disclose pay — DBS chief Piyush Gupta earned a local chart-topping $10.1 million in 2021 — the new requirements will shed light on the pay packages for executives at plenty of other large companies. Thai Beverage Plc, Olam Group Ltd and Genting Singapore Ltd are among the biggest Singapore-listed companies that don’t disclose pay. 

ThaiBev and Genting Singapore did not respond to requests for comment, and Olam declined to comment citing a blackout period before results. 

The move will mark a sea change for Singapore, where a culture of silence on pay and competition concerns mean disclosures are often sparse. The state-owned investor Temasek Holdings and sovereign wealth fund GIC are unlisted and limit their disclosures to “compensation approaches,” not specific figures.

“If companies shift to more transparency, they must ensure that the pay structure is legitimate and pay differences can be explained or be prepared to take remedial action to correct the problems,” said Jason Shaw, a professor at Nanyang Business School. “Otherwise, they risk a slew of negative reactions.”

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