Disclosure of remuneration practices by listed firms weak: Study

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Disclosure of remuneration practices by listed companies remains weak, with the information released often being insufficiently clear for stakeholders to make decisions.

This was a key finding of a report by corporate governance advocate and professor of accounting Mak Yuen Teen and MBA graduate and active investor Chew Yi Hong. The study, supported by Singapore Exchange (SGX), covered all 609 companies with a primary listing on SGX.

It looked at annual reports for financial years ending between April 2016 and March 2017 and published between August 2016 and July 2017.

"We found significant gaps in remuneration practices ... in terms of compliance with the Singapore Code of Corporate Governance," Prof Mak said.

"Poor disclosures aggravate the risks of controlling shareholders and management using excessive remuneration to benefit themselves at the expense of minority shareholders."

Another key finding challenges the oft-cited argument by companies that they withhold pay information for fear of talent being poached.

"Fear of poaching would imply companies are paying below the market," said Prof Mak. "Our findings do not support this. On the contrary, they are consistent with the argument that companies that disclose less may be trying to avoid drawing attention to higher remuneration."

The Code recommends companies disclose total remuneration paid to the top five key management personnel but more than 30 per cent of companies did not do so or gave incomplete data.

SGX Regulation chief executive Tan Boon Gin said: "Shareholders, especially minorities, deserve to know why company directors and executives are paid the way they are. The board and management owe it to investors... to explain the link between performance and remuneration."