Ernst & Young Singapore - 2010 Executive and Board Remuneration report
Good news is the number of CEOs earning in excess of S$5 million of salary has more than doubled since 2008. At least one-quarter of CEOs took home over S$5 million in total compensation packages in 2009. But as the economy is starting to recover, companies are still cautious in increasing fixed remuneration for senior executives, said Julia Smith, Singapore practice leader for performance and reward at Ernst & Young Solutions. According to the Ernst & Young 2010 Executive and Board Remuneration report released today, less than a third (29%) of the CEOs in the 55 companies polled have moved up in their salary band. Furthermore, one in 10 has dropped in their salary band.
Lower salary increments for senior executives
There is also a decline in the number of senior executives, including CEO, CFO and business unit heads, receiving salary increments, said the survey that analysed companies which had released their annual reports for the financial year between 31 March and 31 December 2009. The average increment for these top executives was 2.4% in the financial year of 2009, compared to the 10% pay raise given in 2008. While less than a quarter took a pay cut in the previous financial year, 44% had to take a pay cut or no increase this time round. In fact, only 6% of these top management staff received a pay increment of over 15% in 2009, compared to 39% who enjoyed the pay boom in 2008.
Smith said the conservative approach towards base salary increases may mean that Singapore companies are willing to make short-term sacrifices at the top management level. This would help them keep bottom lines low in order to sustain business profits.
On the up side, bonus payouts for senior executives are slightly higher in 2009 than 2008 even though over one in 10 CEOs had no bonus payments. Of those who did have bonuses took home an amount, ranging from zero to over S$4 million. Only 5% reported receiving no bonuses in 2009, a slight decrease from the 7% who said the same in 2008. However, bonus payouts are still a distance away from pre-crisis standards, Smith said.
Compared to global compensation standards, Singapore has a much lower percentage of compensation delivered through variable pay. Only 20% of companies here require a portion of variable compensation to be deferred and subject to appropriate claw-back. Plus, only a fifth of companies have fully disclosed their executive compensation practices.
Smith believed that a significant portion of variable compensation can be deferred and tied to the company’s future performance to discourage inappropriate risk-taking behaviors from senior executives. She said, “To gain the trust of shareholders, companies should strive to make their compensation policies and structures accountable and transparent, and improve the effectiveness of their disclosures in this area.”
Overall, 56% of CEOs received fixed compensation of between S$500,000 to S$1 million in 2009. CFOs and business unit heads who received between S$250,000 to S$500,000 are at 73% and 55% respectively.
Sources & references: HRO, Ernst & Young Salary Survey
