Are Executive Pay Programs in Singapore Driving Long-Term Value Creation?
At a recent remuneration committee (RC) meeting, a discussion ensued about the effectiveness of the organization’s pay structure for executives and it quickly became apparent that there was a lack of a common definition for how effectiveness is measured. It led to the question: Are the current executive pay frameworks in Singapore actually driving increased shareholder returns over time?
Assuming that the key objectives of a pay program are to attract, retain and reward executives for delivering performance — for the purpose of this paper its assumed to be creation of shareholder value and total underlying returns — an examination of CEOs pay over the last 5 years from the top 30 SGX listed companies (by market capitalization) revealed some fascinating findings.
We initially sought answers to three distinct questions:
Among the top 30 CEOs, average tenure is 10 years (five years for FTSE 100 CEOs; 4.75 years for Fortune 500 CEOs), suggesting that retention is not a significant challenge and current pay structures are sufficient — assuming pay is a reason these executives stay. Furthermore, among the 15 new CEO appointments in the last five years, only 40% were hired from outside the company (33% were hired from outside Singapore), indicating that companies have a strong succession-planning pipeline and pay packages are attractive enough for both local and regional markets.
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