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Getting the formula for CEO pay right

A value creation component is essential to better gauge the true increase in shareholder value. So too is a strong disincentive to discourage CEOs from acting unethically.

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The annual compensation of the late legendary Steve Jobs was only US$1 and he was rewarded entirely on stock options which depended on his ability to drive Apple's profits arising from product innovation in a highly competitive industry.

IN his recent speech on building a culture of trust in the financial industry, Ravi Menon, managing director of the Monetary Authority of Singapore, observed that "compensation structures tend to over-emphasise profits as performance measures". We cannot agree more.

Although directors'...

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