Singapore companies have improved significantly in terms of corporate disclosure and transparency. But there is one area in particular which needs a good hard look, and it’s time for companies and the authorities to draw the line and say – no more! I am referring specifically to directors’ pay, and the propensity of companies to not disclose precisely how much their directors earn. As shareholders, we have a right to know.

Directors of the boards of management play the important role of checking on what management gets up to. Their fiduciary duty is to ensure the accounts are up to scratch, and to check executive management’s direction is in the best interests of the company and shareholders. They are the “keeper of the company”, acting as checks-and-balance on the executives running the day-to-day affairs.

Therefore, the irony is all the grater that this noble role does not seem to extend to disclosure of how much they get paid. Very few companies disclose the exact dollars and cents. They merely state the range of salaries, such as “less than $250,000”, “between $250,000 and S$500,000”, and so on.

This is annoying enough when existing public companies do this in their annual reports. But it’s even worse when debuting companies do this in their prospectuses. We are expected to write cheques to subscribe for shares to people we often have never heard of, and with no track record. For them to enter salary bands, rather than precise figures, is like writing them a blank cheque! Yet CEOs are regularly put under significant scrutiny. As shareholders, we ought to know how much directors get paid, too. It’s our money.

In a sense, directors bear the burden of compliance, and if something goes wrong it’s their neck on the line. They ought to be compensated for this. In addition, some directors add significant value to management, through their own experience, their contacts, and so on. And retail investors need to keep perspective, that directors may only show up to monthly or quarterly board meetings, but their responsibility to the company and their fiduciary duty applies every day of the year.

Further, retail investors are far better off now than they were even ten years ago, thanks to continued refinements by the Singapore Exchange, and the presence of the Securities Investors Association (Singapore), which continually puts pressure on boards to improve.

But the issue of salary bands needs to improve. And in the absence of action by the authorities, it’s up to shareholders to push for it.

Labels: directors pay, salary bands, SIAS