[SINGAPORE] Singapore- listed companies should go beyond remuneration disclosure for top executives, and give shareholders a say on their pay.
This will ensure direct accountability by management to owners of shares, and also help companies build bench strength as opposed to having a "hero CEO", said Lee Suet Fern, managing partner of Stamford Law Corporation, at the Singapore Corporate Awards Seminar yesterday.
Speaking at a panel session, she noted from her experience on the boards of overseas companies that there has been increased discussion on "say on pay", a movement unfolding in developed markets where shareholders have the right to vote on the pay of executives.
Singapore will have to decide whether it wants to adopt an increasingly common practice already followed by countries such as the UK, US and Australia, or "be Robinson Crusoe and ride far out there and be different from everybody else".
"We have given shareholders a say on non-executive compensation, primarily the independent directors. However, this is only a tiny, tiny drop in the huge ocean of corporate compensation," she said. "We have given shareholders a say on the people who supervise but no say on the people who actually manage, run, and control the company."
Furthermore, no board member would want to offend the CEO of a firm and vote against his remuneration package, she added.
The Code of Corporate Governance, revised since 2012, requires that remuneration of chief executives and directors be disclosed by name to the nearest $1,000, instead of the old $250,000 bands.
An analysis by The Business Times of the 50 largest listed companies late last month showed that 64 per cent of Mainboard firms and 24 per cent of Catalist firms followed this disclosure recommendation. Those that did not comply mostly cited confidentiality and competition for talent.
"Our current regime where we only do disclosure is not necessarily a good thing (as it encourages firms to ratchet up CEO salaries, in order to provide an above-average package to stay competitive). Having done that, we might as well go all the way and (increase) the level of consciousness in the board and level of engagement if we're going to have disclosure," she said.
Academic research has also shown that giving shareholders a say on pay has helped to narrow the remuneration gap between "hero CEOs", or very prominent head honchos, and the rest of the management team, she added. "This has been helpful in building a team, building bench strength, and in addressing succession issues."
Other panellists, however, did not agree that such a move would necessarily work.
"It may have the perverse effect that shareholders for whatever reason refuse to compensate the executives fairly, damaging the prospects of the company and deterring much- needed talent from joining the company, particularly those that are troubled," said Singapore Exchange (SGX) chairman Chew Choon Seng.
Gerard Ee, president of Institute of Singapore Chartered Accountants (ISCA), added that most listed firms here are "very small" companies which would have been exempted from such rules elsewhere in the world.
"Most of them find it a great burden to follow compliance rules," he noted.
The Singapore Corporate Awards, now in its ninth year, held the one-day seminar attended by 400 over participants for the first time this year.
The awards recognise and promote excellence in corporate governance among listed companies, and is organised by ISCA, Singapore Institute of Directors, and The Business Times.
Other speakers at the seminar also highlighted the importance of other risk and control functions such as internal and external audit, as well as other market participants such as bankers and auditors in corporate governance.
It would be a mistake to pile increased responsibilities on the board, and in particular independent directors, without recognising the context they work in - relying on effective business operations, oversight functions like HR and risk management, and independent assurance providers such as internal and external audit - and strengthening the overall risk and control framework, said keynote speaker Sir Howard Davies, former deputy governor of the Bank of England.
Mr Chew of SGX also emphasised that corporate governance is not the purview of regulators alone. "It includes other market participants including bankers, lawyers, accountants, academics, the media, and not least, the shareholders themselves exercising their legal authority," he said.
The exchange faces a challenge in striking a balance between pre-empting and reining in excessive behaviour, and being overly prescriptive and imposing a one-size-fits-all regime. "My opinion is that the Singapore Code is pragmatic and leaves room for discretion for individual boards and companies, and indeed, to shareholders and investors," he added.