Tan Kin Lian's Blog: High Executive Pay

Thursday, June 11, 2009

High Executive Pay

Remuneration committees of the board of directors approve high pay for CEOs on the reasoning that it is needed to attract other top talents to join the organisation.

To justify the high pay, the CEOs and top managers have to improve the profits, i.e. to "increase sharehholder value". This has led to a culture of excessive risk taking and taking advantage of customers. This is the reason for the bad business ethics that was seen in recent years.

Singapore has gone into this bad phase, which has led to a serious loss of trust in business and government institutions. I hope that corrective steps are now taken to improve the business ethics and enviornment in Singapore.

Tan Kin Lian

5 comments:

Anonymous said...: The thinking of higher profit for a company leads to higher pay for its top management is justified. Afterall, the government pays more to graduates than non-graduates, mininsters than ordinary folk on the street etc.

starlight; June 11, 2009 6:59 AM
Anonymous said...: Profit is the measure, it is earning, but not revenue although revenue may mean profit but not necessary. You can have high revenue but no profit and even loss.
Being #1 in market share doesn't mean a company is profitable. There is an insurance company going for that and it is going for personal agenda at the expense of policyholders.Who would gain from this? The ceo , the senior managers and the insurance agents will benefit from this strategy.; June 11, 2009 10:13 AM
Anonymous said...: This happens everywhere, officially or unoffcially.

Officially, or publicly their pay can be low, but unofficially? Up to your imagination.

Or officially their pay can be very high, so as to discourage unofficial money. Or is it?

Even politicians who preach business ethics came to power through support from business groups with low regard for ethics. So there is a built in contradiction in this aspect and hence they cannot practise what they preach.; June 11, 2009 11:44 AM
Unknown said...: The high pay culture is in both private and public sector and we did
not have to do that before. You can cut their pay by half, and they would perform just the same. Savings can go to the people and general workers and we would have a better nation.; June 12, 2009 10:23 PM
Redstar said...: My observation is most times there is no correlation between executive pay and profits. A stronger relationship exists between company profit and the state of the economy. If the economy is in recession, don't expect UOB Bank to generate record profits by hiring the top banker in Asia. Examples abound from the Singapore experience for SGX listed companies, including NOL.

Better for companies to donate a part of their gains to the less fortunate and keep a portion as buffer for the next down-turn. In this way, they can contribute to the society they serve, and build up a bad-times fund for their employees.; June 13, 2009 4:47 PM