POSTED 1 Apr 2019 - 15:27

Are Singapore CEOs overpaid?

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How should they be paid, and what would be a fair, equitable CEO-to-worker pay ratio?
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Top Response

Jayaprakash Jagateesan, Chief Executive Officer, RHT Holdings Pte Ltd

CEOs who are promoted internally, talent hunted externally or company owners themselves each bring different values to the table to support an organisation's needs and ambition, and hence their salary structure will likely differ.

Companies should focus on performance-based incentives...

Responses

Jayaprakash Jagateesan, Chief Executive Officer, RHT Holdings Pte Ltd
6 May 2019 - 09:51

CEOs who are promoted internally, talent hunted externally or company owners themselves each bring different values to the table to support an organisation's needs and ambition, and hence their salary structure will likely differ.

Companies should focus on performance-based incentives which drive leaders to enhance performance, creating a bigger pool for all employees to enjoy better remuneration.

Like a football club, star players in professional and financial services might receive greater rewards than their manager. However, the CEO shoulders the greatest responsibility. The perceived high CEO-to-worker pay ratio reflects how well CEOs lead their organisations, placing a value on their skills, traits and the often less obvious but immense responsibility vested in them.

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Karl Hamann, Chief Executive Officer, QBE Singapore
6 May 2019 - 09:33

Listed firms in Singapore appear to be performing well. As such, CEOs are being rewarded and are likely enjoying the increased value of the stock options they hold as part of their packages.
This might help explain growth in CEO remuneration levels here. It also speaks to the motivation behind executive compensation: to incentivise leaders to create value for their organisations while rewarding positive progress.
I strongly believe that remuneration should be structured to ensure longer-term objectives to shareholders and stakeholders are being met, with the CEO's role prioritising execution of long-term strategy set with the Board rather than short-term gains. If a company is doing this well, it should also be reflected in employee salaries on a broader scale.

Nick Jonsson, Managing Director, EGN Network
26 Apr 2019 - 17:20

The compensation package of a CEO is very different from a typical employee on various counts due to the responsibilities involved. CEOs carry the burden in ensuring the organisation's success. He or she is the face of the company. For most employees in an organisation, it's usually their managers and HR that decide on their pay packages. For CEOs on listed companies, it's the remuneration committee from the board of directors that decide on their compensation. While many boards still look at financial indicators as the sole means to determine compensation, this is fast changing with the times. Today, there is an increasing emphasis on sustainability, environmental and social performance of companies.

Mario Singh, CEO, Fullerton Markets
18 Apr 2019 - 16:54

The heart of the issue is that everyone has a different definition when it comes to the terms "fair and equitable". This, combined with the notion that CEOs run companies of different sizes in different sectors, makes CEO compensation both an art and a science.

The issue most often comes up when a company isn't doing well. This provides a clue that total compensation for the CEO must be tied to results or company performance. Most CEOs would have a base salary coupled with a combination of additional allowance and/or bonus. For listed entities, this could include stock options. The board should decide the compensation based on several factors but definitely including responsibilities and performance. It wouldn't be fair to come up with a formula based on CEO-to-worker ratio because different sectors have different labour requirements.

Dileep Nair, Independent Director, Thakral Corporation Limited
18 Apr 2019 - 16:53

Egregious examples of highly paid CEOs who "fiddled while Rome burned" are not systemic of Singapore's corporate landscape. These aberrations denote a failure of corporate governance on the part of the Board and, in particular, of the Remuneration Committee (RC). As an RC member on three listed companies, I'm aware of the rigour of pegging CEO pay to KPIs that include profitability and stock price performance, benchmarking to industry peers, and engaging consultants when necessary.

The idea of an equitable CEO-to-worker pay ratio also is specious. The groups operate in totally different labour markets with no overlap. A CEO's actions are also much more scaleable. Further, the ratios differ significantly across industries and comparisons will be invidious.

Instead of a focus on cutting the CEO's pay which a "high" pay ratio may suggest, it is far better to look at increasing the company's value and then raising the average worker's pay. Such a "levelling up" approach is the sustainable way to go.

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