SINGAPORE (Jan 15): Executive remuneration is one of the key concerns of investors. Although boards and remuneration committees (RCs) would arguably be in a better position than shareholders to determine how much and how best to pay senior management, poorly designed “pay for performance” schemes have contributed to excessive executive pay, sharp increases in the ratio of top executive pay to average employee pay, management myopia, inappropriate risk-taking and other dysfunctional behaviour.

However, compared with other markets, remuneration matters have received less attention from investors in Asia. Instead, investors in Asian companies have been more concerned about related-party transactions. The reality is that executive and director remuneration is in essence a form of related-party transaction. Indeed, financial reporting standards require disclosure of key management personnel remuneration as part of related-party disclosures.

In contrast, stock exchange rules tend to exclude directors’ and executive remuneration as a form of related-party transaction, even though remuneration is one of the ways that controlling shareholders can extract resources out of the company. Such risks may be particularly pertinent in family- and founder-controlled companies, which are prevalent in Asia, including Singapore.

To continue reading,

Sign in to access this Premium article.

Subscription entitlements:

Less than $9 per month
3 Simultaneous logins across all devices
Unlimited access to latest and premium articles
Bonus unlimited access to online articles and virtual newspaper on The Edge Malaysia (single login)

Stay updated with Singapore corporate news stories for FREE

Follow our Telegram | Facebook