Published May 12, 2009

Bosses' pockets weather the storm

STI companies took a hammering in 2008 - but their CEOs' pay remained largely intact

By CHEW XIANG

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(SINGAPORE) With their stock prices getting battered and their total shareholder returns plummeting, listed companies found last year something of a nightmare. But it wasn't such a gloomy year for your average boss of a Straits Times Index (STI) company, who saw his pay even edge up slightly in 2008.

A BT analysis of publicly available records and Bloomberg data found that the 14 chief executive officers whose companies operate on a January-to-December financial year took home an average pay increase of 1.4 per cent.

That is despite the fourteen companies on average lagging the STI benchmark by almost four percentage points, while total shareholder returns including dividends were almost minus 50 per cent; each dollar invested in the STI in January would have shrunk to 54 cents in December, including dividends. For the companies in the sample, net profits fell, on average, about 3.7 per cent from 2007.

The highest paid boss was Keppel Corp's Lim Chee Onn, who was given between $10 million and $10.25 million, up from between $8.75 million and $9 million in 2007. Keppel Corp, which began the year at $12.42 a share, had plummeted to $4.33 by Dec 31, for a total shareholder return of minus 61.4 per cent, underperforming the STI by over 15 percentage points. Net profit for the year was down 2.9 per cent from 2007.

Mr Lim's pay increase, at a minimum of 14 per cent, closely tracks the 15 per cent increase in the company's calculated economic value-add, which is used to determine Keppel executives' compensation.

Of course, the crisis did not leave all bosses untouched as the median salary of the 14 CEOs fell to $5 million, down from $6 million in 2007, even as the average pay rose.

CapitaLand CEO Liew Mun Leong's massive $21.7 million salary for 2007 meant he was the biggest loser in 2008, when he was awarded a mere $4.2 million, 80 per cent less. Yet the fact that his company did relatively well, underperforming the index by just 2 percentage points, arguably makes Mr Liew the most value-for-money CEO in the survey.

Another claimant for the title is Wilmar CEO Kuok Khoon Hong. Although his salary doubled from between $1.5 million and 1.75 million to between $3.25 million and $3.5 million, the company's net profit went up over 160 per cent in 2008, while the stock largely matched the benchmark. Yet Mr Kuok - who, unlike Mr Liew, holds a considerable personal stake in his company - is likely to be worse off on the whole.

At the other end of the value scale is Sembcorp Industries' Tang Kin Fei, whose pay went up 30 per cent to $8.9 million, even though Sembcorp lost almost 60 per cent in value over the year, significantly under the index, while net profit also slipped 3.6 per cent. The company pays out its share-based incentive plan based on 'wealth added and total shareholder return' over three years, according to its annual report, while key executives' bonuses are partly tied to economic value added. EVA attributable to shareholders fell slightly to $336 million from $340 million in 2007.

ST Engineering's Tan Pheng Hock got the fattest raise - he was awarded almost $4 million for 2008, up 36 per cent from $2.9 million the previous year. His company outperformed the index by 14 percentage points, although net profit slipped slightly to just over $470 million.

A number of companies - such as Cosco, Neptune Orient Lines and DBS - were excluded from the sample because their CEOs were replaced during the year. Others such as Singapore Exchange, Singapore Press Holdings and SingTel do not have a Jan-Dec financial year. The sample does include Keppel Land and Yanlord, which were removed from the index this year, as well as ComfortDelGro, which joined only in March.

A recent Associated Press analysis of Standard & Poor's 500 companies showed the median pay package fell 7 per cent to US$7.6 million in 2008 but found that some companies were changing bonus qualification rules or taking advantage of depressed share values to dole out more stock options that could mean fatter paychecks in the future.

These practices were by and large absent from the blue-chip companies in the survey. Many have moved to grants of restricted stock and usually dispense these on a fixed date every year.

However, a BT study last December found that over 20 mostly small companies were taking advantage of low share prices that quarter to issue millions of options to top management. In a number of cases, the grants of options were disclosed late, contrary to listing rules and raising speculation that the options could have been backdated.

The perennial issue - that of disclosing exact pay rather than in bands - has not gone away this year. Just four companies in the survey (CapitaLand, Semb- corp, Sembcorp Marine and ST Engineering) did so, out of 17 companies.