Corporate scrutiny must be disciplined and evidence-based

I REFER to the article, “A formal ‘say on pay’ may be more effective than better disclosure”, published on Apr 8, 2026.

While the proposition is intuitively appealing, it risks oversimplifying both the underlying issue and the effectiveness of the proposed solution.

The debate on executive remuneration should not be reduced to a binary choice between unquestioning acceptance and blanket scepticism. Properly understood, corporate governance requires both structured decision-making and targeted scrutiny where warranted.

Under the Companies Act, directors are subject to fiduciary duties and are entitled to rely on professional advice, provided such reliance is exercised in good faith and with reasonable judgment.

In practice, remuneration committees are supported by independent, internationally recognised consultants who provide benchmarking and technical guidance, while independent directors apply judgment in the context of the company’s performance and long-term strategy.

At the same time, it is equally important to acknowledge that scrutiny is justified – indeed necessary – where there are clear indicators of misalignment.

In cases where companies have experienced sustained underperformance or repeated losses even as executive remuneration remains elevated or disconnected from outcomes, close and rigorous examination is warranted.

This is especially so in situations in which executive directors hold multiple concurrent leadership roles in numerous listed entities, raising questions on time commitment, performance accountability and the basis for determining remuneration across these roles.

In this regard, the article’s reliance on a single metric – namely, “revenue per dollar of pay” – as a proxy for alignment between remuneration and performance warrants caution.

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Revenue alone does not capture profitability, capital efficiency or the strategic life cycle of a business. Companies led by founders or substantial shareholders may, as a matter of deliberate strategy, prioritise long-term investment over short-term revenue efficiency.

To infer governance shortcomings from such data risks conflating business model differences with misaligned incentives.

Similarly, the characterisation of executive directors who are substantial shareholders or who are related to them, as inherently “entangled” should be approached with balance.

Meaningful equity ownership often enhances alignment with shareholders, since founders and substantial shareholders will have “skin in the game”.

This is provided that appropriate safeguards – such as independent board oversight, remuneration committee scrutiny and recusal from conflicted decisions – are in place.

Against this backdrop, the effectiveness of a formal “say on pay” mechanism should not be overstated. In most markets, such votes are advisory in nature and tend to be influenced by proxy guidelines rather than nuanced, company-specific considerations.

There is a real risk that this becomes a procedural exercise – more symbolic than substantive – without materially improving remuneration outcomes. Minority shareholders may lack the information or incentive to evaluate complex remuneration structures.

Notably, Singapore’s corporate landscape is diverse, with a significant number of founder-led, family-influenced and state-linked companies.

A one-size-fits-all governance solution, modelled after jurisdictions with dispersed ownership structures, may not be well suited to local realities.

More broadly, it is important to caution against the influence of populist sentiment or generalised assertions that do not engage with the underlying facts of each case.

Executive remuneration decisions are closely linked to a company’s ability to attract, retain and motivate managerial talent.

An overly simplistic or reactionary approach – divorced from market realities and benchmarking – may have unintended consequences.

This includes undermining continuity of leadership, weakening succession planning and impairing a company’s ability to compete for capable executives.

Scrutiny, to be effective, must therefore be disciplined and evidence based. Targeted examination of underperforming companies enhances governance; indiscriminate criticism risks distorting incentives and weakening the very institutions it seeks to improve.

External commentary plays a useful role in highlighting areas of concern. However, it does not carry fiduciary responsibility, nor does it have access to the full range of internal data and considerations that inform board decisions.

Governance must therefore continue to rest on a framework that combines expert input, fiduciary accountability and transparent disclosure.

A balanced approach, one that supports robust processes while directing scrutiny to cases of genuine concern, will better serve the interests of shareholders and the integrity of the market as a whole.

Li Meng