Impending Million-$ Pay Hike Mentioned in Foreign Press

Atobe SG

While this Singapore Government and the Singapore Press - which they control - continue to trumpet about the huge disparity of Ministerial and Civil Servants' wages compared to the Private Sectors, they have not been honest to also publicise the REVOLT OF THE SHAREHOLDERS.

The Revolt of the Shareholders have already started as early as 1995, when shareholders in the US became disgusted and disillushioned with the atrociously high remuneration package awarded to CEOs and the Top Management.

New age of pay topples old ideas, rewards performance
EXECUTIVE COMPENSATION REPORT CARD

EDWARD IWATA, OF THE EXAMINER STAFF Examiner researcher Kirsten Neilsen contributed to this story.
Sunday, August 27, 1995
(08-27) 04:00 PDT

SAN FRANCISCO BAY AREA --

The shareholder revolt against greedy corporate executives and bloated paychecks has struck Bay Area companies like a windstorm.

Most local corporations are seeking to motivate their top executives with long-term incentive pay and carrots in the form of stock options, according to a study of 300 Bay Area firms by the Examiner and the Compensation Design Group, a San Francisco-based consulting firm that specializes in executives' pay packages.

In the average pay package of a Bay Area executive, an impressive 62 percent of compensation came in stock-option grants. Only 38 percent of the total pay came in base salary and cash bonuses.

In the Dark Ages of corporate pay plans, before the executive pay reform movement led to new federal rules three years ago, many bosses lapped up $1 million-plus salaries, fat cash bonuses and megagrants of stock options. They enjoyed their hefty compensation even if their companies blew the bottom line or stunk up the stock market.

Not anymore. Pigging out at the corporate trough is becoming extinct - at least in public companies with alert shareholders.

More companies are adopting the national compensation trend knowns as "pay-for-performance." The new philosophy is simple: If an executive's company soars like Michael Jordan, his or her bonus and stock options take flight, too.

In the end, the thinking goes, pay for performance better serves a corporation's financial health and its stockholders, who provide equity and capital for publicly traded companies.

"Companies are moving away from fixed pay, such as salaries, and more toward risk-oriented incentive pay," said Frank Glassner, the founder and chief executive officer of Compensation Design Group. "That's a good sign."

The Examiner's study found that in San Francisco's Financial District, for instance, salaries were relatively low last year at Charles Schwab Corp., the thriving discount brokerage.

But executives enjoyed handsome yearly and long-term bonuses of $1 million to $2.5 million linked to growth in sales, profit margins and return on equity.

A short stroll away, executives at TransAmerica Corp. can bank on big stock options only if the company's stock passes a minimum threshold.

At Seagate Technology Inc., the Scotts Valley disk-drive maker, executives pocket only 60 percent of their bonuses in cash. The rest of the bonus money is deferred and must go toward stock options.

Cash-based payouts didn't exactly go south, however.

Local bosses enjoyed an average payout of $394,000 in salary, bonus, retirement contributions and restricted stock, according to the study. That's an 18 percent rise from the previous year.

The king? W.J. (Jerry) Sanders, the flamboyant chief executive at Advanced Micro Devices Inc., who scooped up $6.3 million in cash-based compensation. That's more than $17,000 a day - including weekends.

Bay Area corporate moguls also thanked the stock-market gods last year, cashing in an average of $870,000 in stock options. That's a whopping 206 percent jump from $334,000 in 1993.

The biggest beneficiary: Kenny Liu, chief executive at OPTi, a Santa Clara supplier of electronic computer components. The lucky Liu exercised stock options worth a sweet $16.4 million.

But those big payouts are exceptions to the rule. The Examiner's research clearly showed most Bay Area companies are dramatically shifting their pay practices to reflect the new era in executives' compensation.

"When it comes to compensation, corporate America is finally getting with the program," Glassner said.

"There's no place to hide anymore."

Shareholders' revolt
It wasn't always this way. In the go-go 1980s bosses carted home golden salaries and bonuses more befitting the Gilded Age than the Era of Corporate Downsizing.

Angry investors - mostly giant pension plans such as CalPERS, the California Public Employees Retirement System - waved the banner of reform and turned the public spotlight on greedy bosses.

"A lot of conscientious CEOs are great performers who aren't paid enough," said Graef cq (Bud) Crystal, a compensation expert in San Rafael.

"But a lot of piggish CEOs are driven by excessive greed, pushing for every last dollar they can get," Crystal said.

Finally, the uproar from activist investors led to strong reform two years ago.

Pressure from CalPERS and other big shareholders played a role in management and boardroom shakeouts and changes of strategy at a number of big companies.

In January 1993, CalPERS met with outside directors of 12 companies in efforts to spur performance.

Its hit list included Advanced Micro Devices, Boise Cascade, Champion International, Chrysler, IBM, MacFrugals, Pennzoil, Polaroid, Sears, Sizzler, Time Warner and Westinghouse.

In recent years, regulations have been changed to make it much easier for shareholders to keep tabs on companies.

New disclosure rules by the Securities and Exchange Commission require companies that are traded on the stock market to describe their pay philosophy, show the compensation of their top five executives and chart total shareholder return in comparison to competitors'.

On top of that, the federal government - through Internal Revenue Code 162(M) - slapped a $1 million cap on the amount companies could deduct for their executives' salaries.

The regulatory impact has been dramatic.

Thousands of corporations now eyeball their pay packages like never before. Vigilant board directors ask tougher questions of management. A small army of compensation experts design pay policies for corporate titans fearful of irate investors.

"Companies are largely complying with the spirit of the regulations," said Roger Brossy, a principal with Sibson & Co., a New York-based compensation consultancy.

The pay revolution has even touched conservative corporations in Japan. Sony Corp. recently adopted a stock-option pay plan for its 36 board directors. And consultant Glassner advises Toshiba Corp. and Dai-ichi Kangyo Bank.

Atobe SG

continuation:

Intel's pay philosophy was born in the mid-1980s, when the semiconductor industry was battered by Japanese players. Intel laid off scores of workers and endured pay cuts of 10 percent.

Intel devised a flexible, multilayered pay plan that rewards all employees with cash bonuses if their project, business unit and the entire company does well.

Up to 10 business and financial goals are used as carrots, from earnings per share to improved customer service.

"We'll move quickly in any direction the market takes us," Dyess said.

Future of executive pay

As corporations and investors alike grow more knowledgeable about executives' pay, what will the rest of the decade bring?

Activist investors say they will keep demanding greater accountability from executives, as part of the larger push for the corporate governance of publicly traded companies.

Pay for board directors will come under sharper scrutiny.

The granddaddy of pension funds, CalPERS, plans to pick up the pace this year. It will pressure poorly performing companies and overpaid executives and look into corporate governance issues in overseas markets, such as Japan and Europe.

Despite public outcry and regulatory reform, total compensation to executives has continued to rise.

The average salary and bonus of chief executives at 371 U.S. companies climbed 10 percent to $1.4 million, according to Standard & Poor's Compustat.

Likewise, a study by Crystal that used a different measure of compensation found that CEO pay leaped 12 percent to $3.7 million.

"The feeling here is, "We need to keep pushing on, or the corporate herd will backslide into its old habits,' " said Pat Macht, a CalPERS spokeswoman.

Activist investors are spooked by a recent SEC proposal that would move some pay disclosure data from yearly corporate proxy statements to other documents.

"It's a step backward, putting more burden on shareholders, " said Jill Lyon of Institutional Shareholder Services.

Even if the regulation passes, the revolt of the investors has changed the landscape of corporate America.

"Clearly, 1995 is the Year of the Shareholder, " Glassner said. "Compensation programs everywhere have a lot more bite now. It's truly been a revolution. "

airgrinder SG

from a blog i read: (not word for word)

It's never about right or wrong. Say you're an engineer with a company earning $3K/mth. Boss say u get a $200 pay increment. Will you decline considering there's a kid in korea living on $1 a mth?

If you wun decline, why do you think our ministers will?

Steady man!!

jay_rocks SG

let’s petition!!

Rock^Star SG

Commendable but sadly…a laughable and futile letter too.

charlize SG

If you were a doctor by training and earning 1 million a year in a hospital, do you think a law firm should pay you 1 million dollars a year because you were getting paid 1 million a year doing lasik operations in the hospital? Laughing

Atobe SG

Singapore is long known to be run as a Corporation, with MM LKY as the defacto Executive Chairman, and the PM as the CEO, running Singapore as if it is a Family Owned Corporation - similar to the Public Listed Companies, whose stocks are largely in the hands of private scions - such as UOB and OCBC.

If Singapore is managed as a Business Corporation, there must be a line drawn when it is no longer a Corporation, as it also has Social Obligation to those Citizens who are trapped in the larger Capitalist Net grown by Singapore Inc, and also to those other Singaporeans who have invested their time and skills in developing and growing Singapore Inc.

Singapore's Growth and Success is not merely the net result of the efforts of those in the Top Echelon of Singapore Inc only, as if not for the sacrifices and efforts from the Singapore Citizens there would not have been the Singapore that we know of today.

While the Singapore Government claim mega-million dollar rewards for themselves, what has the Singapore Citizens received except for the paltry handouts given annually, and taken back with a slew of government approved increases in charges to all categories of essential services ?

As the following study by the Economic Policy Institute April 3, 1996 of the US shows, there is an Economic Case for Corporate Responsibility to Workers.

It is time for the Singapore Government to realise its political and social responsibility towards Singaporeans.

It is time for this Singapore Government to benchmark its own performance on the growth in numbers to the Middle and Higher Income in Singapore Society; which should result in a correspondingly reduction in numbers of those in the lower income group.

Will the Singapore Government dare to subject their performance according to the number of 'smileys' that the Citizens are prepared to give, and not simply arbitrarily assume Citizens' satisfaction and reward themselves with mega millions increases ?

Economic Case for Corporate
Responsibility to Workers

By Eileen Appelbaum, Peter Berg, and Dean Baker

With the Dow Jones industrial average above 5500 and corporate profits at a 25-year high, corporate America may have fulfilled Wall Streets highest expectations. But higher profits and productivity have failed to deliver higher wages and job security, and business finds itself accused of putting corporate greed ahead of the nations economic interests.

Observers across the political spectrum have found the behavior of numerous companies unseemly.

Many large, successful corporations are permanently downsizing their workforces while earning record profits. Corporate executives are raking in multi-million-dollar pay packages while workers pay stagnates or declines.

Republicans such as Massachusetts Gov. William Weld and presidential contender Robert Dole have lectured corporations on their responsibilities to their workers and communities.

Democrats such as Senators Edward Kennedy and Jeff Bingaman, Congressmen Richard Gephardt and David Bonior, and Labor Secretary Robert Reich have gone further and suggested that the government provide incentives that reward good corporate behavior and punish bad.

Wall Street and the business community have responded by defending their obligation to maximize shareholder value. As former Scott Paper chief executive officer Albert S. Dunlop put it, The reason to be in business is to make money for your shareholders. The shareholders own the company. They take all the risks. Among these shareholders, the argument goes, are pension funds and mutual funds serving a broad swath of American workers and consumers. The bottom line of this argument is that everyone is better off when corporate managers maximize shareholder value.

This argument, however, is based on widely held economic myths. There is, however, a strong economic case to be made for a broad vision of corporate responsibility that includes workers as well as shareholders.

Problems With the Shareholder Argument

Shareholders do not own companies. Rather, they have an equity stake. Corporations do not exist in Adam Smiths description of a free-market economy because they are not a product of free markets theywere created by state intervention. The laws that set up corporations separate the ownership of equity claims (shares of stock) from the ownership of property.

Owners of a few shares of stock in a company are not entitled to the ordinary rights of property ownership-the rights to possess, use, dispose of, exclude others, manage, and control the company. In addition, shareholders are exempt from the liabilities usually associated with ownership.

If the company pollutes the Love Canal, installs asbestos in nursery schools, or makes silicon brea st implants, the shareholders cannot be personally sued, no matter how wealthy they may be.

If the company goes bankrupt and leaves creditors holding the bag, the creditorscannot recover what they are owed from the shareholders personal assets; liability is limited to the value of their shares.

In other words, shareholders who invest in a company are owners of stock in the company, not the company itself. As we show below, their stake is similar to that of employees, who invest their time and skills in the expectation that the company and they, in turn, will benefit.

Employees, like shareholders, bear the risks of investing in the corporation.

Shareholders who have invested in the stock of a company get their piece of the corporate pie only if there is something left after all expenses are paid. Thus, they bear the risk that nothing will be left for them. They have an interest, therefore, in monitoring management to ensure that corporations are managed efficiently and that these residual gains (profits) are maximized.

Economic theory says that companies are likely to be run more efficiently when corporate managers are accountable to those who bear such risks. But employees make investments and bear risks as well.

In most employment relationships, employees invest in skills and knowledge that are specific to the company. Their payoff comes in the form of wages that are higher than what they can earn in a job at another firm-but only if the company prospers and employs them in the future. Because they bear risks in the same way as shareholders, employees are equally motivated to see that the firms resources are used efficiently and that the firm prospers.

Downsizing is not necessarily an effective way to maximize shareholder value. Certainly some companies have seen employment shrink as they became more efficient. But productivity growth is a gradual process.

As the regional Bell company Nynex demonstrated, it is possible to plan for this type of reduction in staff in a way that minimizes the devastating effects on individuals and communities. No company can credibly claim that productivity growth requires sudden drastic or across-the-board cuts in employees.

Wall Street equates efficiency with layoffs, but almost half the productivity gains in the U.S. economy come from companies that upsized and added employees. Surveys by the American Management Association show that most companies that downsize do not meet their goals for increasing productivity
or profit.

continuation below

Atobe SG

continuation

According to the AMA, many try to make good by downsizing again. A study comparing the financial performance of downsized firms over a period extending from three years before the downsizing to two years after found that the firms as a group performed no better two years after downsizing than they did before. Still, the pressure to downsize tends to crowd out more effective strategies for improving firm performance.

Downsizing is often a cover for mismanagement. AT&T Chief Executive Officer Robert Allen committed what a Wall Street .laurnal columnist called a $7.5 billion boo boo when he bought NCR Corp. in 1990. AT&T is also writing off hundreds of millions of dollars it invested in online services it is now phasing out. Other stumbles include its $150 million investment in Unitel, a Canadian long-distance network that went bankrupt.

The result of all these mistakes? On January 2, CEO Allen announced that AT&T is eliminating 40,000 jobs.

Maximizing shareholder value benefits only a small segment of the population. Federal Reserve data show that more than 5 1 million Americans owned some stock in 1992, either directly or indirectly through mutual funds and defined-contribution pension and savings plans. However, an analysis of these data by economists James M. Poterba and Andrew A. Samwick shows that most of these holdings are minuscule.

They found that the wealthiest 10% of households own 90% of stocks; the wealthiest 20% own 98%. The remaining 80% of middle-class and working-class households own only 2% of stocks, either directly or indirectly. When holdings in pension and retirement savings accounts are subtracted, the share of stocks owned by this 80% of households drops to a mere 0.5%.

Thus, middle-class households benefit little, if at all, from a rise in the Dow Jones average.

One group that clearly benefits from a rise in the stock price is the corporate managers themselves.

The most tangible accomplishment of the shareholders revolt has been to change the compensation package so that top managers pay depends far more heavily than before on the stock-market performance of the company.

This focuses the attention of top corporate managers on movements in share prices, sometimes to the exclusion of other goals. At AT&T, Mr. Allens pay consists of $5.85 million in salary and bonus and nearly $11 million in stock options, enough presumably to encourage him to focus on AT&Ts share price.

And AT&T is not alone: CEO pay at some large corporations more than doubled last year. According to a survey by compensation consulting company Pearl Meyer & Partners, average CEO pay at large companies rose to $4.37 million in 1995, a 23% increase overall and a 45% increase in stock-option grants.

Tilting the compensation package so heavily toward stock options provides corporate officials with a personal motive for ignoring the claims of other stakeholders and with enticements to enrich themselves on short-term jumps in share prices. An overemphasis on short-term increases in share price can undermine the long-term viability of the company to the detriment of employees, creditors, and long-term stockholders.

A Broader View of Corporate Responsibility Like shareholders, employees make investments in a firm and take risks. Unlike most shareholders, however, employees livelihoods can be severely threatened by poor investment decisions and bad management.

Shareholders, after all, rarely have more than 2% or 3% of their holdings in any one company. And it is far easier for investors to sell their shares when they see that a company is poorly managed than it is for workers to change jobs. In most cases, employees with years of experience are unable to find other jobs at their previous wages. Decisions in which they had no part have essentially wiped out their investments in skills and knowledge. This is not only unfair, it is an inefficient use of societys resources.

As stakeholders in the corporation whose incomes depend on the companys profitability and ability to employ them, employees should have the same rights and opportunities as shareholders to hold managers accountable. Moreover, their knowledge of the company and its customers may make them better suited than more distant shareholders to monitor managements decisions and assure that they serve company interests.

The first corporations were established by government expressly to pursue public purposes, and states today charter corporations under their authority to promote the common welfare.

Government already sets the rules by which corporations must be governed. Workers rights to representation, like those of shareholders, should be legally mandated in the rules of corporate governance.

Specifically: Employees should have a voice in decisions that affect the viability of the company. We propose that a significant proportion-perhaps a third-of a corporations board of directors be elected by employees.

Because employees invest in firm-specific skills, they should participate in decisions about training. Training committees composed of employees and managers should decide both the content of company training and who gets it. Employee participation within a high-performance work system can bring new ideas to bear on how to increase everyones returns on investment.

As Senator Bill Bradley has said, The form has yet to emerge, but the need to involve employees in dealing with the future-even a frightening future-should be obvious.

These are two steps that can be taken to ensure that corporate executives pursue high returns for all stakeholders in their companies.

Suggested reading

Baker, Dean. 1996. Trends in Corporate Responsibility: Getting More for Less? Technical Paper,

Economic Policy Institute, Washington, D.C.
Appelbaum, Eileen, and Peter Berg. 1995. Financial Market Constraints and
Business Strategy in the United States. Technical Paper, Economic Policy Institute, Washington, D.C.

Slipshade SG

Very true. Think about it lor. If we are the receiving party... the one who's going to benefit (as in we are the minister), will we decline the payrise because of the growing wealth disparity and the worsening living standards of our people? Sad

robertteh SG

As expected, every one of our MPs would put up some hypocritic arguments called tough questions by the press like there must be considerations and moderations of pay increases for ministers but such increases are inevitable if Singapore is to keep up with globalization etc in order not to lose talents to other countries or the private sector.

Then in order to avoid any sentimentality or bad taste over any use of party whip or give an impression of tyranny, it would be stage-played that there will be no voting but every one is expected to ask tough questions.

In Singapore's unique way called leadership, the motion to increase ministers' salaries will be passed without any mishaps or challenges. It will go down in the history of men one of the best self-reward schemes of any men elected to represent people's conscience and aspiration.

After all every one of the MPs has nothing really to object as by objecting to their pay masters getting hefty salary rises they would be the losers as seen in past cases of MPs or ministers being dropped from GE.

So the good news is the juniors among ministers will be getting jumps from 0.7 to one million and the senior ones from S$1.0 m to S$1.5 m and SM/MM/PM getting the biggest jumps from S$2.0 to S$3.00 million per annum (not reflecting concurrent retirement packages, life-long fees, directors' fees and bonuses).

So after all the debates, the assumptions have been made that Singapore GDP is indeed only or largely created by the ministers and these talented MPs and champaign bottles being passed around to toast to their grand GDP success.

Now fast forward to 2010, or 2012 should the IR fail to attract enough gamblers or visitors or should there be another world recession, with job lay-offs, we can be very sure based on past talented performance that there will be a grand re-play of their famous denials why our economy fails from our million-dollar ministers:-

(1) Globalization is the cause of the recession
(2) Singapore workers have failed to re-skill and re-train themselves.
(3) China and India are the cheaper manufacturing destinations.

UandMe SG

I hope Worker’s Party & SDA will compete in every SRC & GRC in the next election.

Kenashi SG

if a minister is corruptable, it doesn't matter how much u pay him
if he is interested in public welfare, it doesn't matter that he is not paid as highly as he should be
if somone think that Singapore will fail becos he isn't there, let him go Twisted Evil

pinkish purple papayas SG

I feel so insulted!!! How dare they say our Minister only earns 3 times more than US President George Bush??!

Singapore has a PM, SM, MM and prata nathan!!

Thats 4 people filling up the top post! Contrast to only 1 USA president!

That means, Singapore Lee Family earns 12 times more than a single USA President.

And the coming minister pay hike would make them be paid like 20 times more than a single USA president!! Now thats GOOD world class governance!!

We are just a small dot! and small dots are not easy to control!! unlike USA, its the size of a continent, small dots take more time to locate on the map. Big countries like USA with 200+ yrs of legacy and 300million people to manage is chicken feet management.

So all of u shut up! cause if u dun pay, u are jst gonna become maids in other people's countries!! Evil or Very Mad

Kenashi SG

nobody is indispensable!!
furthermore, all talks about loss of talents, we didn't see any minister leaving, hence why the heck do we need to pay them more to retain them when they r not leaving in the first place Laughing

airgrinder SG

SM and Nathan not Lee lah...keke.

So lee family get 6 times more than bush. hoho

I wonder what's bush thinking when he see this. Maybe he should consider coming to sg instead, less things, less people to gover, no countries to go to war with, no major pressure from rival parties, and MORE PAY!!! hoho

LazerLordz SG

http://video2.channelnewsasia.com/cnavideos/multiplevideos_watermark.asp?skin=player1.swf&bgskin=playerbackground.swf&filename=Parliament%209%20Apr_Low%20Thia%20Kiang.flv&adfilebefore=cna%20video2.flv

The CNA video of LTK's speech.

ShutterBug SG

BRAVO, LTK!!!

Very good speech!!

I like his phrase: "If you don't pay a civil servant peanuts, but a banana instead, you will still get a monkey!"

Laughing

huy SG

wait wait wait.. i don get it leh.. what their increment got to do with women becoming maid? i tik if they kip increasing their paid, increasing gst, increase this and that but not increasing our pay, we will really become maid by that time..

Vigelic SG

but now is u ownself say u get pay increment. + increment for all ur frens that work with you in engineering and go drink kopi after work one.

Vigelic SG

Is workers party website (www.wp.org.sg) the only place where we can see MPs speech in parliament on text? on wp website of cos onli see low thia khang one.. which is better than nothing but any way to see the rest?

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