Monday, June 23, 2008

How Much Should We Pay Our GLC CEOs?

It is a big issue on the 100% increment for certain Malaysia GLC CEOs. The 100% increment could be fair if their current packages are deemed low and they may have performed according to the KPIs. They deserve to have better salaries based on their contributions and talents.

The timing could be wrong when majority of population is in major crisis with escalating costs of living. However, we may have to look into this issue with open mind and heart.

In the UAE, generally salaries are much more higher for most top GLC executives. I do not really know the details but I guess from my own remuneration, these top executives who are mostly from western countries, not to mention those local bumiputeras/Emiratis earn good money. Of course, non-GLCs may give better perks as well.

Therefore, how much should we pay our GLC CEOs?

GLC CEOs’ pay generally lower
KUALA LUMPUR: The rumoured 100% rise in the pay packages of Tenaga Nasional Bhd’s president and chief executive officer (CEO) Datuk Seri Che Khalib Mohamad Noh and chief financial officer Datuk Mohd Izzadin Idris, which has been widely discussed on blogs, has again raised the perennial debate on how much CEOs should fairly receive.
The middle-income group, which forms the majority of society, may never comprehend why the chiefs of the many government-linked companies (GLCs) and non-GLCs should be paid that high.
Like it or not, increasing the salaries of several top-ranked executives at a time when the masses are burdened with increasing costs of living will inevitably cause resentment among the public. The reason is simple, these CEOs are already getting annual incomes most people will not be able to accumulate in a lifetime.
Nonetheless, even among the corporate chieftains, the gap between their pay could be as wide as tens of millions of ringgit. A comparison of executive directors’ pay between the top 10 GLCs listed on Bursa Malaysia in terms of market capitalisation and the top 10 non-GLCs seemed to indicate that the former group’s CEOs generally earned slightly lower incomes, with the exception of a few.

However, this cannot be ascertained for sure because the remuneration of the GLC CEOs was clearly stated in the annual report while for the non-GLCs, it is not so transparent. This was evident in a compilation of 20 such companies. For GLCs, the individual breakdown of income is often presented. In contrast, most of the non-GLCs provided a lump sum in directors’ fees and remuneration, without disclosing the breakdown paid to individual directors.
Among the GLCs, only Bumiputra-Commerce Holdings Bhd (BCHB) group chief executive Datuk Nazir Razak’s 2007 income of RM9.35 million outshone his banking peers. However, Nazir is seen as the very reason why BCHB is among the fund managers’ favourites.
Malayan Banking Bhd (Maybank) former president and CEO Datuk Amirsham A Aziz was paid some RM2.71 million last year, according to its annual report, compared with Public Bank Bhd managing director and CEO Datuk Seri Tay Ah Lek’s RM6.18 million.
Amirsham’s pay was even lower than Public Bank executive director Datuk Lee Kong Lam (RM4.6 million) and AMMB Holdings Bhd group MD Cheah Tek Kuang (RM2.87 million).
Sime Darby Bhd group chief executive Datuk Seri Ahmad Zubir Murshid was paid RM2 million last year (before the mega merger). Without any detailed breakdown, IOI Corporation Bhd and PPB Group Bhd paid a total of RM31.36 million and RM11 million to their respective executive directors.
It is worth noting that family-owned and family–run corporates paid relatively high fees and remuneration to their executive directors. These include Genting Bhd, which paid a total of RM91.73 million, and YTL Corporation Bhd, which paid a total of RM36.4 million. In fact, the Genting group, as in the previous years, paid out the most for its top office-bearers.
Responding to questions on GLC CEO pay, Khazanah Nasional Bhd managing director Tan Sri Azman Mokhtar said in a recent function that directors’ remunerations were transparent and disclosed in annual reports. “Let me assure you that there is a careful framework (under the Blue Book that provides guidance on executive compensations).”
Some quarters strongly argued that CEOs should not automatically qualify for pay rise, but should be commensurate with the performance and percentage growth of the companies.
There have been the occasional cases of shareholders rejecting the proposed increase in directors’ fees, but generally, most company officials have had their fees approved.
Last week, Time Engineering Bhd’s directors became the latest to have their proposed increase in fees rejected by its shareholders due to the bad times and that the previous year’s fees of RM228,000 be maintained. Its major shareholder UEM group had initated the pay rise following a survey by an international accounting firm.
Minority Shareholder Watchdog Group (MSWG) CEO Abdul Wahab Jaafar Sidek said minority shareholders were less concerned about the quantum of increase in the remunerations of directors, as long as they contributed to increasing shareholders’ values.
From his personal encounters with minority shareholders, he said these shareholders were more worried about losing good directors than seeing the company forking out more money to pay them high.
“Talents are very important. They are very fluid and can move around. You should not just look at local competition. Talents are in demand in many parts of the world. Their pays must be benchmarked against the similar industry, globally.
“You have to pay well to attract talents. Then, you have to pay well to retain them. Of course, they must perform. If we (MSWG) feel they should be paid higher, we say ‘pay higher’,” he told The Edge Financial Daily via telephone.
Commenting on blogs raising concerns on the purported 100% pay rise for Tenaga’s Che Khalib and Mohd Izzadin, Abdul Wahab said: “You don’t look at the percentage. You have to look at what they (directors) give to the company. You have to reward appropriately.”
“For example, CIMB paid about RM10 million to Nazir last year but shareholders are okay with it because CIMB made a lot of money. In fact, some of the shareholders told me they were afraid that Nazir might leave CIMB,” he said.
He added that MSWG’s survey showed that Tenaga had ranked highly in terms of corporate governance and the revision in directors’ remunerations was timely.
“Good corporate governance includes good performance and conformance. So far, I think it (Tenaga) is performing well, especially in such a difficult environment,” he said.
Last week, Azman had also said any pay increase for GLCs’ top-ranked executives were performance-based, and that such increase was needed to retain scarce talents nowadays.
Abdul Wahab said: “I totally agree with him. Talents help to drive business and company’s growth. You have to compete worldwide.”

by Gan Yen Kuan


Zawi said...

Many people are against his fee increment because it came at a time when Tenaga has revised upward their tariff. In away his performance will be boosted because of the tariff hike rather than his performance. nger among the staff and workers was created because no better package was doled out to them other thaan the 3 percent pay hike.
The killer blow came in when his pay hike came in during a hefty fuel hike.
Those three factors combined make it hard for the people to accept it.

NEIL said...

Yes,I totally agree with you that talents are very important and equally important is the pay also.That is what is happening in s'pore where meritocracy counts not here in malaysia where cronies and nepotism are more important.Also race should not be a issue,we only need brains .