Should Singapore adopt 'say on pay'?

IN the corporate setting, the remuneration of chief executive officers (CEOs) and senior executives is typically determined by the board of directors. In many countries, corporate governance codes have been developed to provide guidance on such remuneration practices. However, there has been a recent trend of countries adopting regulations which allow shareholders some form of voting rights on executive remuneration. Such voting rights are commonly referred to as Say on Pay (SoP) votes.

While certain aspects of individual SoP regulations may differ - for example, votes can be binding or non-binding - they are generally instituted with the aim of incentivising boards to act in the interests of shareholders and to avoid awarding executives excessive pay packages.

SoP first appeared in the UK in 2002, when the Directors' Remuneration Report Regulations required all UK companies listed on major exchanges to hold non-binding SoP votes on executive compensation annually. In 2013, regulations were updated to give shareholders a binding vote.