Date: May 15, 2001
SIAS is encouraged by the level of interest shown by shareholders at recent AGMs of various public listed companies on aspects of corporate activities and their concerns, in particular, on the over compensation of directors.
Whilst SIAS readily recognizes that the level of remuneration should be competitive to attract, retain and motivate directors needed to run the company effectively, at the same time companies should be sensitive to shareholders’ aspirations and expectations. They should avoid paying unjustified and disproportionate amounts to directors especially at a time when corporate profits are likely take a dive in the current financial year.
Board of Directors must accept that their primary duty to shareholders is to give them reasonable returns for their investment in their company. Shareholders will react by not investing in companies whose management/directors are bent on acting against their interests.
SIAS strongly advocates the principle that directors remuneration, especially that of executive directors, should be linked to performance. The Board should take into account the company’s performance and the remuneration packages within the industry and in comparable companies. Shareholders will therefore not accept payments to directors, which lack reasonable justification.
SIAS supports the recommendation of the Corporate Governance Committee on the Level and Mix of Remuneration and urges companies to adopt, in particular, recommendation 2.2 which reads, “The performance related elements of remuneration should form a significant position of the total remuneration package of executive directors and should be designed to align their interests with those of shareholders and link rewards to corporate and individual performance. There should be appropriate and meaningful measures for the purpose of assessing executive directors’ performance.”
SIAS urges public listed companies to adopt the Corporate Governance Code and consult shareholders at Annual General Meetings before implementing extra-ordinary remuneration schemes in future.
Mr David Gerald J.
President & CEO
Securities Investors Association (Singapore)