The disclosure of directors’ remuneration in Singapore has been a topic of increasing importance in corporate governance landscape. Since the introduction of mandatory disclosure requirements by the Monetary Authority of Singapore (MAS) in 2012, companies in Singapore have been required to disclose information on directors’ remuneration in their annual reports. This article explores the impact of mandatory disclosure of directors’ remuneration on corporate governance in Singapore.
Transparency and Accountability
The mandatory disclosure of directors’ remuneration has increased the transparency and accountability of boards in Singapore. Shareholders are now able to access information on the remuneration packages of directors, including their salaries, bonuses, stock options, Compilation of Financial Statement and other forms of compensation. This level of transparency allows shareholders to evaluate the performance of directors and the effectiveness of boards in managing company affairs.
In addition, mandatory disclosure of directors’ remuneration has led to greater accountability among boards in Singapore. Boards are now more accountable to shareholders for their decisions on directors’ remuneration, and they must justify their remuneration policies and practices in their annual reports. This increased accountability has helped to strengthen the relationship between boards and shareholders, and it has improved the overall corporate governance environment in Singapore.
Alignment of Executive Pay with Performance
Mandatory disclosure of directors’ remuneration has also led to a greater alignment of executive pay with performance. Shareholders are now able to evaluate the relationship between executive pay and company performance, and they can hold boards accountable for any discrepancies between the two. This increased accountability has helped to align executive pay with performance, and it has incentivized directors to focus on improving company performance.
In addition, mandatory disclosure of directors’ remuneration has led to a greater focus on long-term value creation. Companies in Singapore are now required to disclose information on their long-term incentive plans, which are designed to align executive pay with long-term value creation. This has encouraged boards to focus on creating sustainable value for shareholders, rather than short-term gains.
Role of Shareholders
Mandatory disclosure of directors’ remuneration has also strengthened the role of shareholders in overseeing directors’ remuneration. Shareholders are now able to exercise greater influence over boards’ decisions on directors’ remuneration, and they can hold boards accountable for any discrepancies between executive pay and company performance. This has improved the relationship between boards and shareholders, and it has encouraged greater engagement between the two.
In addition, mandatory disclosure of directors’ remuneration has encouraged greater activism among shareholders. Shareholders are now more likely to engage in proxy battles or vote against remuneration proposals that they deem excessive or inappropriate. This has increased the pressure on boards to justify their remuneration policies and practices, and it has encouraged them to be more responsive to shareholder concerns.
Mandatory disclosure of directors’ remuneration has had a significant impact on corporate governance in Singapore. It has increased the transparency and accountability of boards, aligned executive pay with performance, strengthened the role of shareholders in overseeing directors’ remuneration, and encouraged greater activism among shareholders. However, there are also potential unintended consequences of this disclosure requirement, such as a decrease in executive talent and increased pressure on boards to comply with market norms.