Why few S'pore firms offer long-term incentives

The article about the low adoption rate of long-term incentive plans (LTIPs) among Singapore firms as part of their compensation was interesting, but omitted to point out the shortcomings of these plans (Few firms here offer CEOs long-term incentives: Poll; Sept 14).

These include difficulties in establishing LTIP performance measures; prohibitive administrative costs due to the complexity of such plans, which are also time-consuming to develop and deploy; and a general lack of understanding of LTIPs.

These may explain why few Singapore firms adopt them.

A large number of Singapore firms are also family businesses.

As family businesses, there is a genuine and justified concern about keeping control within the family.

LTIPs, which may include stock-based compensation, are inconsistent with this objective.

To be sure, LTIPs could be designed as phantom equity plans, such as share appreciation rights to which are attached neither shareholding interests nor voting rights.

A large number of Singapore firms are also family businesses. As family businesses, there is a genuine and justified concern about keeping control within the family. LTIPs, which may include stock-based compensation, are inconsistent with this objective.

But these, too, are difficult and time-consuming to administer.

To encourage greater adoption of LTIPs, more needs to be done in terms of education on the pros and cons of such plans.

Grants may also be given to defray the costs of developing and deploying LTIPs.

Woon Wee Min

A version of this article appeared in the print edition of The Straits Times on September 18, 2017, with the headline 'Why few S'pore firms offer long-term incentives'. Print Edition | Subscribe