I am heartened by recent plans by the Singapore Exchange Regulation (SGX RegCo) to make companies disclose exactly how much they pay their chief executive officers and directors (SGX makes push for full disclosure of CEO pay, Sept 13).
This is indeed a step forward. However, a figure by itself is of limited informational value.
It will be more useful for investors to understand the remuneration vis-a-vis other metrics.
For example, what is this figure as a percentage of the company's sales or operating profits or total staff costs?
How does this percentage compare against previous years and against other peer group companies in similar industries and of similar market cap sizes?
If the company's metrics fall in the 90th percentile, it should explain why this is so and justify itself.
Such benchmarking will be useful information for investors to draw inferences on the performance of the CEO and board, and provide guidance on whether to re-elect board directors at the annual general meeting.
I believe such additional information will encourage boards and perhaps the chairmen to take a more active role in formulating good strategies, evaluating the performance of management, and being more accountable to shareholders, to whom they owe a fiduciary duty.
SGX Regco's proposal to impose a nine-year cap on the tenure of independent directors is encouraging, but I believe most investors agree more can be done.
Perhaps there can be a better definition of what independence entails, such as no prior business or personal relationships between the independent director and the company management or controlling shareholder. This will ensure minimal conflict of interest.
For Singapore to thrive as a financial hub, corporate governance cannot be understated. Board directorships are not retirement jobs, especially for listed companies. Board directors must constantly be encouraged to promote best practices in the interests of all investors and not merely the controlling shareholders.
For a board member to achieve this, competency and independence (in fact and in perception) are fundamental.
Hopefully, more guiding principles can be introduced in time to come, either by SGX or the Singapore Institute of Directors.
Kang Yong Wee