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:

  1. Is the CEO pay competitive and at the right levels to attract and retain top talent?

  2. How sensitive is CEO pay to organizational performance?

  3. Are better performing companies doing anything differently?

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. 

Nishant Mahajan
Head of Executive Remuneration

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