The elephant in the boardroom

The Business Times
View From The Top
Published: 25 September 2017

How should CEO pay be aligned with company performance? What would be an acceptable ratio of CEO pay to the wages of the average worker in the organisation?

THE issue of CEO pay is a highly divisive one and understandably so. Figures from the recent study by Korn Ferry Hay Group are disconcerting, as it found, for example, that one-third of SGX-listed companies with bonus payouts for their CEOs in FY2016 gave them bigger bonuses than the previous year when the company had actually been less profitable.

However, it may be useful to note that some of these could be due to poorly-designed compensation packages that companies had already committed to when the CEO was first hired.

I don’t necessarily believe that there should be a recommended ratio pegged to CEO pay vis-a-vis the average worker. Instead, we should consider adopting more of a pay-for-performance culture like in the US, to better align the CEO’s pay with that of the company’s profitability.

We should create better-designed remuneration structures pegged more to performance and long-term incentives such as share options for greater and more sustainable corporate performance.

Pay ratios is a “pie-splitting” mentality. Let’s focus on enlarging the pie instead.

Ronald Lee
Managing Director
PrimeStaff Management Services Pte Ltd

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