SGX Regco’s plan for full disclosure on listco boards, CEOs’ pay a boost for transparency; poaching fears overstated

SINGAPORE Exchange Regulation (SGX RegCo)‘s plan for boards and chief executive officers (CEOs) of listed companies to disclose full details of their salaries is helpful for transparency, and brings Singapore in line with other major jurisdictions, according to experts in board and C-suite matters.

They say worries about poaching arising from salary disclosures may be overstated, adding that there may be other reasons for board and top management shake-ups.

Ang Wan May, managing partner for leadership advisory firm Egon Zehnder in Singapore, said pay needs to be competitive to attract and retain top talent, but it is not the only important factor.

“People move for a variety of reasons. They move for the mission, the purpose, the learning, the challenge, and, of course, compensation has to be fair,” she said. “At the top of the house, it’s really rare for us to see someone move just because of compensation.”

Publishing additional salary data, she said, is unlikely to change matters.

Robert Cho, senior client partner at organisational consultancy Korn Ferry’s advisory practice, said competitive reasons may not be as big a factor as in the past, with Singapore talent and overseas expatriates competing in a global environment.

“For some of the stronger companies….(with) very strong top talent, people probably already have an idea of what they are getting paid anyway,” he said. “And their alignment for pay for performance actually is very strong, so they actually have nothing to be concerned about.”

SGX RegCo’s upcoming consultation on pay disclosure comes amid poor compliance from SGX-listed companies on remuneration disclosures, which currently apply on a “comply or explain” basis.

An independent review by KPMG in Singapore found 35 per cent of SGX companies disclosed director remuneration in dollar value, and just 18 per cent did so for CEOs. The majority disclosed remuneration in salary bands.

SGX RegCo noted that competitive reasons are less compelling when it comes to directors versus key management personnel (KMP). It added that the upcoming requirements will also distinguish between the disclosure of director and KMP remuneration.

The reluctance to share information on remuneration is understandable, experts said.

“It’s just normal human behaviour not to shout about how much you are getting paid,” Egon Zehnder’s Ang said.

Cho of Korn Ferry added: “Ask any company in the world, if you had a choice of disclosing or not disclosing, I think everyone will probably say not disclose.”

Yet, the need for transparency should outweigh the discomfort of individuals.

Publishing pay could give shareholders greater assurance and reduce potential risks, Ang said. “It provides clarity on how the organisation is being rewarded and decisions are rewarded for short-term, medium-term, and long-term goals.”

There would be a need to incentivise the short-term, but Ang said a good compensation package should take into account short-, medium- and long-term goals. Shares, for instance, could be one way to incentivise CEOs, as they are invested and aligned with the shareholders

Cho also highlighted that remuneration disclosure has implications on pay for performance alignment, pay equity issues, and competition with other jurisdictions for investors’ dollars.

“Investors, proxy advisers have stated that they find it challenging to make comparisons on management teams or boards if there are no disclosures versus other mature jurisdictions (such as) US, UK, Australia that require full disclosure,” he said. “Without having the data, then people are guessing – in terms of the performance of the executives of the company.”

The use of salary bands that are appropriately narrow could provide investors with the necessary information. But Cho said the global trend is moving away from this.

“It was acceptable 10 years (ago), and then they just kept rolling forward for competitive reasons. But this is a global landscape, and people are starting to recruit and attract on a global basis,” he said.

He believes the top 5 KMPs should also be subject to similar requirements to be consistent with global standards.

Among primary-listed Straits Times Index (STI) constituents, recent annual reports reviewed by The Business Times showed mixed levels of disclosure.

Nearly all companies provided full dollar-value remuneration for their directors, in keeping with the Code of Corporate Governance (CG Code), but the transparency was lower for the top five KMPs.

Just two STI companies – SGX and Jardine Cycle & Carriage – provided full dollar-value disclosure for remuneration for their top five KMPs, going beyond the minimum requirement for disclosure in bands.

Some other companies, including the local banks, opted not to disclose individual remuneration details for their KMPs – even in salary bands – citing confidentiality and competition.

In terms of CEO pay, most STI companies provided full dollar value disclosure in line with the CG Code. The exceptions were Thai Beverage, Genting Singapore, and all the STI real estate investment trusts (Reit), which only provided salary information in bands.

A reason cited by most STI Reits in the annual reports was that their CEO pay comes from the fees the Reit pays to the manager and not the Reit itself.

In response to queries from BT, a Mapletree spokesperson said the managers of Mapletree Industrial Trust and Mapletree Logistics Trust are of the view that unitholders’ interests would not be prejudiced as the indicative range of the CEO’s remuneration, as well as the total remuneration for the CEO and KMP, have been provided.

“Detailed disclosure of remuneration of key management personnel is commercially sensitive and confidential in this competitive Reit industry and may result in talent retention issues,” the company added.

A CapitaLand Investment spokesperson – responding to queries on CapitaLand Integrated Commercial Trust and CapitaLand Ascendas Reit – said the CEO remuneration is disclosed in bands of S$250,000, complemented by a “detailed write-up of the remuneration principles and policies”.

“This offers unit holders clarity and assurance that the CEO is paid appropriately,” the spokesperson added.

“We welcome SGX RegCo’s move to consult the market before requiring disclosures for the remuneration of the CEO. We hope SGX RegCo will take into consideration concerns that remuneration matters involve commercial sensitivities and intense competition for talent.”