BT - Time to ask tough questions on ministers (oops, executive) pay
Business Times - 18 Oct 2011
Hock Lock Siew
Time to ask tough questions on executive pay
By R SIVANITHY
THE 'Occupy Wall Street' protest against the greed and excesses of the US financial sector may not have made its presence felt locally, but those who feel a sense of outrage at the gross inequality that exists in the corporate world should voice their opinions at company annual general meetings, starting with asking some hard questions about that most contentious subject of all - executive pay.
A good beginning would be the example set by famed US investor Warren Buffett, who this year took just US$100,000 in salary for the 30th consecutive year, and who does not receive bonuses or stock options.
Instead, Mr Buffett - a long-time, well-known critic of obscenely high executive pay - believes in tying chief executive officer (CEO) salary to long-term company performance rather than annual profits because of the short-term nature of the latter.
He's also a great believer in accountability: 'You need a person at the top who has all the downside that somebody has that loses their job working at an auto factory,' he said in an interview this year. If a company fails, Mr Buffett said management should give back five times the highest compensation they received in the previous five years.
This makes plenty of sense, particularly today given the volatile times in which we now live. For instance, the US dollar over the past two months has rebounded 10 per cent, the Straits Times Index recently plunged 20 per cent in a few weeks and daily price swings of up to 10 per cent on Wall Street are now common.
Economies can grow healthily in one quarter but contract sharply the next - consider for example that at the start of the year the outlook for Singapore's growth was robust with no talk at all of a recession, yet last week it was announced that the economy just narrowly avoided a technical recession in the third quarter.
If volatility in all facets of corporate and financial life has spiked upwards, shouldn't CEO compensation be based on long-term goals to smoothen out short-term fluctuations?
© 2010 Singapore Press Holdings Ltd. All rights reserved.
Business Times - 18 Oct 2011
Hock Lock Siew
Time to ask tough questions on executive pay
By R SIVANITHY
THE 'Occupy Wall Street' protest against the greed and excesses of the US financial sector may not have made its presence felt locally, but those who feel a sense of outrage at the gross inequality that exists in the corporate world should voice their opinions at company annual general meetings, starting with asking some hard questions about that most contentious subject of all - executive pay.
A good beginning would be the example set by famed US investor Warren Buffett, who this year took just US$100,000 in salary for the 30th consecutive year, and who does not receive bonuses or stock options.
Instead, Mr Buffett - a long-time, well-known critic of obscenely high executive pay - believes in tying chief executive officer (CEO) salary to long-term company performance rather than annual profits because of the short-term nature of the latter.
He's also a great believer in accountability: 'You need a person at the top who has all the downside that somebody has that loses their job working at an auto factory,' he said in an interview this year. If a company fails, Mr Buffett said management should give back five times the highest compensation they received in the previous five years.
This makes plenty of sense, particularly today given the volatile times in which we now live. For instance, the US dollar over the past two months has rebounded 10 per cent, the Straits Times Index recently plunged 20 per cent in a few weeks and daily price swings of up to 10 per cent on Wall Street are now common.
Economies can grow healthily in one quarter but contract sharply the next - consider for example that at the start of the year the outlook for Singapore's growth was robust with no talk at all of a recession, yet last week it was announced that the economy just narrowly avoided a technical recession in the third quarter.
If volatility in all facets of corporate and financial life has spiked upwards, shouldn't CEO compensation be based on long-term goals to smoothen out short-term fluctuations?
© 2010 Singapore Press Holdings Ltd. All rights reserved.
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