Calls to review what some call the 'corporate Gini
coefficient'
By JAMIE LEE
And this comes amid calls to review Singapore's 'corporate Gini
coefficient' - or the income gap between CEOs' pay and the median
salary.
The highest-paid executive director had an $11.7 million annual
salary last year, compared to the top pay of $8.8 million for an
executive director in 2008.
By contrast, the non-executive director who was best paid in
2010 took home just $375,000. And in 2008, the best-paid
non-executive director actually earned a bit more - $385,000.
The lowest-paid executive director earned $30,000 last year,
triple the amount in 2008. By comparison, the lowest-paid
non-executive director earned $4,000, double the figure two years
previously.
Broadly, some 40 per cent of chief executives were paid more
than $1 million last year.
The fixed basic salary made up 57 per cent of the CEO's pay,
while 43 per cent came from a variable cash component, according to
the poll - which had 84 per cent of the survey participants listed
on the mainboard. A quarter of the participating companies have an
annual turnover of more than $750 million, up from 17 per cent in
2008.
With non-executive directors' responsibilities getting heavier,
their pay could trend higher over time, SID chairman John Lim
noted.
'Over a period of time, especially with directors having to make
more commitment in time and resources - which would put a natural
limit on the number of boards they can serve - it's unavoidable
that non-executive directors' pay would have to go up,' he said at
a media briefing yesterday.
Directors' fees may be under a disproportionate amount of
scrutiny when compared to the focus on executive pay, Lee Suet
Fern, managing partner at Stamford Law, highlighted at a corporate
governance panel two days ago.
This focus is magnified by how directors' fees are subject to a
shareholders' vote while the CEOs' salaries are not, noted Ms Lee,
adding that in the US, a non-binding shareholders' vote on CEO
salaries has helped to signal to the board whether shareholders are
satisfied with the compensation structure.
This vote, known as the 'say on pay', was a rule passed by the
Securities and Exchange Commission (SEC) early this year.
But Lawrence Loh, of the NUS Business School's department of
strategy and policy, said the emphasis should be on having a
structured and equitable approach to reward value added and good
performance.
'We should not be addressing the issue for the sake of applying
parity between the pays of non-executive directors and executive
directors and CEOs,' associate professor Loh told BT.
'Given the difference in the relative amounts of pay,
shareholder and regulatory attention should focus more on the pay
of the executive directors and CEOs.'
SID's Mr Lim pointed out that the explosion of senior management
salaries has been a global trend, citing the changes in the pay
ratio of US CEOs to the average worker.
According to the Economic Policy Institute, an American
non-profit think- tank, the average CEO in America now makes about
300 times as much as the average worker. This is up from 100 times
in the early 1990s, and has soared from 40 times in the
1970s.
'That's gone out of whack but what is the (right) ratio?' asked
Mr Lim, adding that competition in the global market matters.
'Over time, there will be soul searching as to what is
reasonable if a CEO earns in two-thirds of a day more than what a
lowest-paid employee earns in a year.'
Stamford Law's Ms Lee added that a winner-takes- all culture
could be taking shape when it comes to determining salaries for top
executives.
'There is an increasing gap between what the chief executive
takes, and what the median salary is within the company. Question
whether that is right,' she said on Monday, calling for a review of
the 'corporate Gini coefficient'.
But Mr Lim also argued that there has been too much focus on
disclosure of CEOs' exact salary.
'If you're earning above $3.5 million and less than $3.75
million, what does it matter if it's plonked in that bracket -
rather than (specified as) $3.655 million? It doesn't really serve
much purpose.'
It becomes an issue if firms do not disclose an upper band
limit, added Mr Lim, noting that companies should explain its
compensation structure and how salary has been computed.
Meanwhile, 97 per cent of companies polled by SID last year said
they identify potential non-executive directors through personal
contacts. Mr Lim urged companies to broaden their search by using
third-party firms or by tapping SID's database.
As for tenure of directorships, SID's survey showed that 22 per
cent of independent non-executive directors have served on boards
for more than nine years, up from 17 per cent in 2008.
(SINGAPORE) An interesting disparity is emerging between the
salaries of non- executive directors and executive ones, a survey
of 68 Singapore listings by the Singapore Institute of Directors
(SID) showed yesterday.
