Related Posts

Share This

Managing increased Disclosure and Scrutiny: The impact of the revised Code

As most directors will know, MAS recently issued the revised Code of Corporate Governance and this includes important changes to the remuneration sections of the Code. A summary is set out on the next page.

As a result of CGC changes, many companies will be increasing their disclosure of the amounts paid to their most senior executives, the measures used to assess executives’ performance and the link between performance and pay.

The regulatory environment in Singapore is, essentially, a combination of disclosure and shareholder rights. The listing rules specify that a company’s annual report should disclose in accordance with the Code or explain why this has not been done. The listing rules also provide useful guidance on the details of required disclosures (which many companies seem to be unaware of). In theory, shareholders will then vote against the board if they don’t like the remuneration. For a range of reasons, this is unlikely to happen in practice and we believe that, in many companies, shareholders will be the least interested group.

The most interested people will likely be employees, at all levels in a company. Apart from natural human interest in seeing what the boss is paid, there are several potential challenges that need to be managed:

  • The increased disclosure of executives’ remuneration, particularly for those who are not directors, will lead to a need to ensure that all pay decisions are based on a clear structure and be as objective as possible. Executives will be able to see how their own salary compares to others and some will use this information to lobby for higher pay.
  • Disclosing performance measures for the CEO can be helpful, but only when these are consistent or clearly aligned with those communicated to others in the organisation.
  • In unionised companies, labour agreement negotiations may well be impacted if senior management are seen to be receiving substantially higher pay rises than the workers.
  • Companies will also need to manage, or at least be aware of, the complex interactions between mainstream media, social media and employees.

Another interested group will be competitors. Many companies already explain not fully disclosing management pay because of concerns that this will make it easier for competitors to poach staff. A larger concern, we think, will be the extent to which disclosing executive performance measures signals details about strategy. For example, if a CEO is paid to increase market share, then competitors might be able to ascertain clues about pricing policies. Care will be needed in getting the right balance between disclosure and explanation.


Freshwater Advisers has been founded in Singapore by two highly experienced consultants, Jon Robinson and Kwong Hui Hen. They provide company boards, investors and management with a source of independent and impartial advice on a wide range of compensation issues, informed by high-quality focused research and backed by sound judgement based on their substantial experience in both human resources and finance.