Remuneration: Pay Fairly, But Do It Right And Be Transparent

Published January 11, 2018

By Mak Yuen Teen and Chew Yi Hong

A new report titled “The Singapore Report on Remuneration Practices: Avoiding the Apaycalypse” finds significant gaps in remuneration practices among companies listed on the Singapore Exchange (SGX) in terms of compliance with the Singapore Code of Corporate Governance. Disclosure of remuneration amounts remains weak across all categories of directors and management.

The report provides useful information on remuneration for different types of directors and key management, and for companies with different market capitalisation and in different industry sectors. It examines differences in key management remuneration for family versus non-family companies and more transparent and less transparent companies. It also identifies overall leaders in remuneration practices, especially in terms of disclosure.

The report is written by Associate Professor Mak Yuen Teen of NUS Business School, a corporate governance advocate, and Mr. Chew Yi Hong, an MBA graduate from London Business School and active investor. It is supported by SGX and covers 609 companies with a primary listing on SGX. Information is based on annual reports for financial years ending from April 2016 to March 2017 and published between August 2016 and July 2017. Note that some companies have since issued new annual reports which are not covered in our study.


We identify 13 companies to be the best in compliance with the Code guidelines on remuneration, especially disclosures. Some large cap companies that made the list are CapitaLand, Frasers Centrepoint, Singapore Exchange and Singapore Telecommunications. Small cap companies include Baker Technology, Dynamic Colours, Nera Telecommunications and SP Corporation. The only mid cap that made the list is Tuan Sing Holdings. We would emphasise that good remuneration practices require more than just compliance with Code guidelines and disclosures.

Based on remuneration paid to directors and key management disclosed in financial statements, the 609 companies paid a total combined amount of $2.5 billion in the year, or about $4.1 million on average per company. Shareholders in these companies approved or pre-approved total remuneration of $188 million for non-executive directors and independent directors, ranging from $50,000 to $4,000,000 on a per company basis, with a mean of $312,000 and a median of $199,000. On a per director basis, the median fee is $53,000 – $49,000 for small cap companies, $64,000 for mid cap companies and $103,000 for large cap companies.

For companies within the same market cap group, companies that disclosed having family members earning $50,000 or more generally pay higher remuneration to directors and key management relative to market cap, revenues and total assets.

We also found that within the same market cap group, companies with higher remuneration tend to be less transparent in remuneration disclosures. Companies often cite fear of poaching for not fully disclosing remuneration. Fear of poaching would imply that companies are paying below the market. Our findings do not support this. On the contrary, they are consistent with companies that disclose less may be trying to avoid drawing attention to relatively higher remuneration. We should point out that we are not advocating that companies should pay below-market remuneration as that can adversely affect their ability to attract and retain talent.

Some other key findings include:

  • All companies, except one, have a remuneration committee or equivalent. However, contrary to the Code, 48 companies have an executive director and one other had two executive directors on the remuneration committee. 5 companies have a non-independent director and 1 has an executive director (an executive chairman) as the chairman of the remuneration committee. Six companies did not meet the majority independence criteria for their RC as recommended by the Code, including 2 that had an executive director on their RC.
  • Disclosure of remuneration in bands together with the names of individuals is the most common disclosure method used across all categories of Chairman, CEO, executive directors, non-executive non-independent directors, independent directors and key management personnel. Just 4% of the companies disclosed the exact remuneration amounts with name of at least 1 key management personnel and only 2% did so for 5 or more key management personnel. Seven companies said they have no key management personnel other than the executive directors.
  • Although the Code recommends that companies disclose total remuneration paid to the top five key management personnel, more than 30% did not do so or disclosed with incomplete information. 23% disclosed the aggregate remuneration for fewer than five key management personnel and nearly 10% disclosed for more than five key management personnel.
  • Eleven companies used an unlimited top band for disclosing the remuneration of the executive chairman (including a CEO who also holds the chairman’s role). Fourteen companies used an unlimited top band for the CEO (who does not hold the chairman’s role), while 10 companies did so for executive directors other than an executive chairman or CEO. For chairman, non-executive director and executive director remuneration, about 1% of companies did not disclose any information at all for each of these categories of directors.
  • Ninety companies disclosed the fee structure of non-executive directors, with large cap companies leading the way.
  • For companies that disclosed the exact remuneration of the executive chairman, the median amount is $545,000 and the maximum is $8.4 million. For CEOs, the median remuneration is $614,000 and the maximum is $12.9 million, for companies disclosing exact remuneration.
  • For companies that disclosed a fee structure for non-executive directors, the base fee for small caps is as low as $10,000 and as high as $71,500, with a median of $38,000. For mid caps, the minimum base fee is $28,000 and the highest is $60,000 with a median of $44,000. For large caps, they are $38,000, $150,000 and $68,000 respectively. The additional fees for chairing the board or committees or for serving on committees, as a percentage of base fee, increase as companies get larger.
  • At least 17 companies use remuneration shares or restricted shares as part of the remuneration for non-executive directors, including independent directors. Most clearly disclose that there are no vesting and performance conditions and with a selling moratorium that lasts until the director leaves the board. Together with the use of share ownership guidelines by some other companies, these are good practices that more companies should follow.
  • There are at least 180 companies where non-executive directors and independent directors are eligible for share options or performance shares (including 32 that gave out such awards during the year) which we consider to be inappropriate for such directors.


Based on our study, the following are our recommendations:

  1. Companies should consider whether the responsibilities of the RC should be expanded to cover other human capital-related issues.
  1. To better ensure that remuneration policies and packages are appropriate, the board should have competencies in areas such as human capital and remuneration-related matters or have access to such expertise, and to external sources of remuneration data. Where it engages an external remuneration consultant, it should critically evaluate the independence of the remuneration consultant and its recommendations.
  1. Independent directors should encourage companies to be more transparent in their remuneration disclosures. They can start by ensuring that their own remuneration is disclosed in exact amounts.
  1. Companies should disclose the fee structure for non-executive and independent directors, such as the base fee, additional board chairman fee, additional fees for chairs and members of each committee, and other applicable fees.
  1. The Code can be enhanced by clarifying that the remuneration amounts and components shown in the remuneration table should include remuneration paid at the subsidiary level and the fair value of share options/shares granted.
  1. To allow investors to better understand the structure or mix of remuneration, the Code can recommend that companies disclose the following where they are applicable: annual salary, annual cash bonus, annual profit-share, other cash-based performance-related income/bonuses, stock options granted, share-based incentives and awards, other long-term incentive components, and benefits in kind,
  1. To improve transparency of the amounts paid to key executive officers, the Code could recommend disclosure of the remuneration of top five highest-paid executives individually and in total, rather than top five KMP (who are not the CEO or directors).
  1. Companies should ensure that the amount and mix of remuneration for executive directors and key management, in terms of fixed versus variable, short-term versus long-term and cash-based versus share-based remuneration, is appropriate for attracting and retaining talent, and encouraging the right behaviour that is in the long-term interest of the company.
  1. To provide better safeguards against excessive remuneration in founder- and family-controlled companies, regulators could consider requiring or recommending the disclosure of the total remuneration paid to the controlling shareholder and family members.
  1. Non-executive directors should be remunerated primarily through cash fees, remuneration shares or restricted shares. They should not be remunerated through share options, performance shares or any other forms of remuneration that is linked to the performance of the company or the remuneration paid to management.
  1. Companies that do not use remuneration shares or restricted shares for non-executive directors should consider adopting share ownership guidelines encouraging these directors, including independent directors, to use part of their cash fees to buy some shares in the company and retain those shares until they leave the board.
  1. Companies should include all components of remuneration, including the fair value or quantity of share options/shares granted where they are used, in the remuneration for non-executive directors that is put up for shareholders’ approval.


The full report is available for download below.


Mak Yuen Teen is a corporate governance advocate and an Associate Professor of Accounting at the NUS Business School, where he specialises in corporate governance. Chew Yi Hong has an MBA (with distinction) from London Business School and is an active investor and corporate governance researcher.

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