CEO pay in S'pore holds steady as profits slip: report

[SINGAPORE] The median salaries of CEOs in Singapore held steady at $875,000 per annum in the last financial year, even as the profitability of companies slipped 0.5 per cent. And head honchos in the property and finance sectors were the best paid, followed by those in hotels and restaurants.

These were some of the key points in global management consultancy Hay Group's "Singapore Top Executive Remuneration Report 2014" out yesterday.

It looked at annual company reports collected as of Nov 29, 2013, and analysed remuneration data of over 1,000 top executives from 260 listed companies in nine major industry sectors.

It reviewed the pay practice - including the pay level and pay for performance - for CEOs and top executives, including key functional executives such as chief operating officers (COOs), and top finance, human resource and marketing executives.

Hay Group found that CEOs in large-sized companies took home a median total remuneration of about $4.42 million per annum in FY2012/2013 - 3 per cent lower than the previous financial year. Those in medium-sized companies were paid a median total remuneration of about $1.76 million, 17 per cent higher than the year before. For small-sized companies, the median total remuneration level for CEOs was about $625,000, similar to the year before.

CEOs in the property sector earned the most, at the median level of $2.70 million per annum. Those in the finance sector came in next at $2.13 million. Those in the hotels and restaurants sector came in at $1.59 million, while those in the construction sector came in fourth highest at $1.23 million.

The report also revealed that deputy CEOs or COOs are the highest paid key functional executives in publicly listed companies, with a median total remuneration of $515,000 per annum.

This is followed by CEOs of subsidiary companies, top finance executives, human resource/ administration/corporate service executives, marketing/sales/business development executives - with each of these having a median total remuneration of $375,000.

Hay Group found that there was a positive correlation between companies who aligned their top executives' pay closely to corporate performance and better shareholder returns.

Its report said that an analysis of the total shareholders' returns (TSR) - which is, share price appreciation plus dividend payout - showed that companies that have better pay for performance alignment tend to have higher TSR; 17.2 per cent of companies having similar CEO bonus for similar company profitability achieved a five-year TSR of 69.6 per cent.

In addition, it found that 14.6 per cent of the companies had significantly higher CEO bonus for lower company profitability, indicating a significant misalignment between the CEO bonus payout and the company profitability; these companies achieved a five-year TSR of 4.21 per cent.

Kevin Goh, director of Executive Rewards, Hay Group, Singapore, commented: "There are ongoing debates on whether better pay for performance translates to better shareholders' returns. While our analysis shows that companies with a better pay for performance alignment have higher TSR historically, it will be interesting to observe if the pattern continues in the longer term."

Hay Group has found that only 28 per cent of the companies analysed rewarded their top executives with long-term incentive (LTI) plans in FY 2012/2013, with the large-sized companies expectedly taking the lead in the utilisation of LTI (86 per cent), followed by medium-sized companies at 32 per cent and small-sized companies at 17 per cent.

"In Singapore, the lower utilisation of LTI in rewarding top executives in Singapore companies could arise from concerns such as the potential dilution and challenges in setting performance measures for long-term incentive plans, the perceived value of underwater stock options and complexity in valuation of LTI instruments," Mr Goh said.