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Singapore CEOs likely to get even richer after being forced to reveal pay

Bloomberg • 4 min read
Singapore CEOs likely to get even richer after being forced to reveal pay
Formalised in January, Singapore Exchange Ltd.’s S68 new rule requires listed companies to disclose salaries for CEOs and individual company directors. Photo: Bloomberg
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CEOs who’ve been grumbling about Singapore’s new mandatory pay disclosures could be in for a pleasant surprise: a raise.

Formalised in January, Singapore Exchange Ltd.’s S68 -

new rule requires listed companies to disclose compensation for chief executive officers and individual company directors, inclusive of base salary and any bonuses or incentive pay, starting with financial years ending on or after Dec 31, 2024.

Executive pay disclosures are considered good corporate governance, a sign of more transparency and a tool for investors to scrutinize excessive pay packages. Such measures have been standard in the US, UK and EU for decades.

But research suggests that pay disclosures have done more to increase executive compensation than to suppress it. Companies face pressure to raise pay to retain top employees, with comparisons made not only domestically but internationally, according to experts.

“The result of disclosure has been a ratcheting up in pay — companies copy the pay practices of other companies as they fear being left behind with the least able top executives,” said Alexander Pepper, professor of management practice at the London School of Economics and Political Science. “There is little evidence that disclosure has had this desired effect” of moderating pay, he added.

Among Singapore-listed firms, less than 40% of the 103 companies tracked by Bloomberg disclose pay. The universe includes mostly mid-to-large cap companies that publicly publish ESG data.

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Pepper highlighted the London Stock Exchange, which in 1995 began to require companies to disclose remuneration. Between 1995 and 2017, CEOs of companies in the FTSE 100 Index saw their pay rise about 10% per year, more than triple the average annual increase in UK national earnings.

Meanwhile, nine-figure paychecks are proliferating in the US. More than 30 public-company executives took home US$100 million ($133.8 million) or more at the end of fiscal 2021, according to the Bloomberg Pay Index.

When faced with disclosure requirements, firms tend to reduce reliance on stock awards and perks as a form of compensation primarily to avoid media scrutiny, rather than reducing any overall pay package, according to a 2022 study led by researchers at the University at Buffalo School of Management. “Boards significantly adjust the mix of compensation awarded by reducing the sensitivity of CEO pay to equity price changes, particularly when the CEO is likely to garner media scrutiny,” the authors wrote.

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While the biggest financial firms in the city-state already disclose pay — DBS Group Holdings’ Piyush Gupta earned a local chart-topping US$10.1 million in 2021 — the new requirements will shed light on the pay packages for executives at plenty of other large companies. Thai Beverage Pcl, Olam Group Ltd. and Genting Singapore Ltd. are among the biggest companies in Singapore that don’t disclose pay.

ThaiBev and Genting Singapore didn’t respond to requests for comment, and Olam declined to comment citing a blackout period before results.

“There will be those that welcome it and those that have to get used to it but we do encourage greater levels of transparency on balance,” said Kurt Wee, president of the Association of Small and Medium Enterprises in Singapore. For entrepreneurs, it’s more for “competitive confidentiality” that they may prefer to keep such disclosures more broad, he added.

The move will mark a sea of change for Singapore, where a culture of silence on pay and competition concerns mean disclosures are often sparse. The city’s state-owned investor Temasek Holdings Pte and sovereign wealth fund GIC Pte. are unlisted and limit their disclosures to “compensation approaches,” not specific figures.

“If companies shift to more transparency, they must ensure that the pay structure is legitimate and pay differences can be explained or be prepared to take remedial action to correct the problems,” said Jason D. Shaw, a professor at Nanyang Business School. “Otherwise, they risk a slew of negative reactions.”

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