Formalized in January, recent Singapore Exchange Ltd. rules require listed corporations to reveal the remuneration of their chief executive officers and individual board members, including base salary and any bonuses and incentives, ranging from financial years ending on or after December 31, 2024.
Disclosure of executive pay is seen nearly as good corporate governance, an indication of greater transparency and a tool for investors to analyze excessive pay packages. Such measures have been standard within the US, EU and UK for many years.
But research suggests that salary disclosure has done more to spice up executive pay than to curb it. Companies face pressure to lift salaries to retain top performers, and comparisons are being made not only nationally but internationally, experts say.
“The upshot of the disclosure was that pay rose — companies copied the pay practices of others because they feared they would be left behind by the least capable CEOs,” said Alexander Pepper, a professor of management on the London School of Economics and Political Science. “There is little evidence that disclosure had the desired effect” of moderating pay, he added.
Among Singapore-listed corporations, lower than 40% of the 103 corporations tracked by Bloomberg disclose salaries.
Pepper pointed to the London Stock Exchange, which began requiring corporations to reveal their salaries in 1995. CEOs of FTSE 100 corporations saw their pay rise by about 10 per cent a 12 months between 1995 and 2017, greater than thrice the typical annual increase in UK national earnings.
Meanwhile, nine-figure paychecks are proliferating within the U.S. More than 30 public company executives made $100 million or more at the top of fiscal 2021, in keeping with the Bloomberg Pay Index.
In the face of disclosure requirements, corporations are inclined to reduce their reliance on stock awards and bonuses as a type of compensation, largely to avoid media scrutiny, slightly than to cut back any overall compensation package, in keeping with a 2022 study by researchers on the University at Buffalo School of Management. “Boards significantly adjust the structure of award compensation, reducing the sensitivity of CEO compensation to stock price changes, particularly when the CEO is likely to be the subject of media scrutiny,” the authors write.
There will likely be those that will welcome it and people who can have to get used to it.
While the city-state’s largest financial firms already disclose salaries — DBS Group Holdings’ Piyush Gupta earned $10.1 million in 2021, putting him at the highest of local charts — the brand new requirements will make clear executive pay packages at many other major firms. Thai Beverage Pcl, Olam Group Ltd. and Genting Singapore Ltd. are amongst the biggest corporations in Singapore that don’t disclose salaries.
ThaiBev and Genting Singapore didn’t reply to requests for comment, while Olam declined to comment, citing a break in the outcomes announcement.
“There will be some who welcome it and some who will have to get used to it, but we encourage more transparency on the balance,” said Kurt Wee, president of the Singapore Small and Medium Enterprises Association. For entrepreneurs, more “competitive confidentiality” may mean they like to maintain more disclosure, he added.
The move will mark a radical change for Singapore, where a culture of silence on pay and competition concerns means disclosures are sometimes sparse. The city’s state investor Temasek Holdings Pte and national wealth fund GIC Pte. should not listed on the stock exchange and limit their disclosures to “pay approaches” slightly than specific figures.
“If companies move toward greater transparency, they need to make sure that their pay structures are legal and that pay gaps can be explained or be prepared to take corrective action to address the issues,” said Jason D. Shaw, a professor at Nanyang Business School. “Otherwise, they risk a backlash.”
