TRENDS EXECUTIVE COMPENSATION SALARY
Singapore - Even though top executives in Singapore received an average salary increase of 10% in 2008, these averages may be misleading because remuneration practices were inconsistent across various companies.
According to a Responding to Realities report by Ernst & Young which examined executive and board compensation practices for 60 Singapore companies listed in the SGX100, it found that 23% of senior executives did not receive any salary increase for the 2008 financial year (FY08). On the other hand, 39% received increases greater than 15%.
Figures showed the number of CEOs who received packages above S$5million declined in FY08 as compared to a year ago, and executives who were paid low relative to their peers, had their compensation adjusted in line with market practices as shown by more CEOs earning above S$1 million and no chief financial officers (CFOs) earning under S$250,000 in FY08.
In terms of variable compensation, 7% of key executives in Singapore received no short-term incentives (STI) in FY08, up from 2% in FY07. In fact, 11% of CEOs received no STI payments last year, as compared to 2% the previous year.
It is no surprise that the STI has been reduced in FY08, Julia Smith, Ernst & Young’s Performance and Reward Singapore practice leader said, explaining that STI plans help align compensation with business performance, and allow flexibility in responding to short-term business needs such as riding through a downturn. Hence, the trend of using STI deferral is likely to pick up in Singapore, as companies tighten the pay for performance linkage in coming years.
And while bonuses were down for CEOs and business unit heads, bonuses were actually on the rise for CFOs. One reason is that during tough financial times, the CFO role becomes essential to ensuring business survival. In some cases, a CFO would anticipate the credit crunch and act proactively to ensure an ongoing supply of cash for the company.
In terms of long-term incentives (LTI), while almost 90% of analyzed companies have some form of LTI plan in place, only half made grants in FY08.
"As companies position themselves for the economic upswing, they should maintain a strategic, rather than a reactionary approach to compensation design," said Smith. "Moving forward, we expect total compensation packages to be driven by the competitive labor market, as well as continued constraints on fixed compensation, short-term incentive bonus pools and payments."
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