Non-executive directors (NEDs) in Singapore receive the second-highest pay among their peers in four ASEAN countries, namely, Singapore, Malaysia, Indonesia and Thailand.

These are the findings from a report released today by the global management consultancy Hay Group.

According to the report, at the median level, NEDs from large companies in Singapore received a remuneration of S$95,000 in 2010. Indonesian NEDs took the top spot at S$239,000 while NEDs in Thailand and Malaysia received S$59,000 and S$58,500 respectively.

The report is based on an analysis on data collected from 200 large companies in the four ASEAN countries from 2008 to 2010.

The Hay Group report also shows that the remuneration for NEDs climbed steadily over the three years. Singapore NEDs saw a pay increase of 9 per cent in 2009 and 2010.

In Malaysia, the increase was 17 per cent in 2009 and 3 per cent in 2010. Indonesian NEDs observed an increase of 13 per cent in 2009 and 10 per cent in 2010 and in Thailand, the increase remained steady at 14 per cent in 2009 and 2010.

Mr Oliver Ricaille, Regional Director, Executive Compensation (Asia), Hay Group, said, "The recent upward trend in NED remuneration does not come as a surprise as these large companies have increased in complexity, often translating to more time commitment and a higher volume of intricate information to be processed by the board. At the same time, NEDs need to demonstrate the right skill sets to appropriately fulfil their duties, given this complex nature."

Industry-wise, the top three sectors in Singapore for median average NED remuneration are led by banks (S$152,000), followed by food (S$113,500) and transportation (S$110,000). Likewise, banks in Malaysia, Indonesia and Thailand offer the highest pay to NEDs compared to other industries.

Directors' fees and other remuneration

The Hay Group report shows that the remuneration for NEDs in Singapore's large companies is mainly composed of directors' fees (92 per cent) and share-based compensation (8 per cent). In contrast, benefits and perquisites are widely used for NED remuneration in Malaysia, Indonesia and Thailand. In particular, benefits-in-kind in Malaysia account for a significant portion (30 per cent) of total remuneration for NEDs, in various forms like social allowance, car allowance, reimbursement, retirement gratuity and others.

Significantly for Indonesia and Thailand, NEDs receive bonuses which form a large portion of their total remuneration, with 52 per cent in Indonesia and 33 per cent in Thailand.

Mr Ricaille said, "Two key elements that should be eliminated without negotiation are benefits-in-kind that can be perceived as status driven and performance-based pay. These elements may jeopardise the independence of the directors and more importantly, the independence of their decisions."

Meanwhile, share-based compensation was not commonly used for NED remuneration among the four countries. In Singapore, 10 out of the top 50 companies offer stock option plans for NEDs and 13 companies offer full-value share plans for NEDs. Even fewer companies (less than 10 per cent) in the other three countries do likewise.

Under-representation of female NEDs

According to the report, the gender diversity in board leadership remained low, with the majority of the large listed companies in the four countries lacking female NEDs on their boards during 2008 to 2010.

In Singapore, the percentage of companies with one or more female NEDs on their boards remained largely unchanged at around 45 per cent. The prevalence of female NEDs in Indonesia (around 30 per cent) is the lowest among the four countries. In contrast, companies in Malaysia and Thailand are making greater progress and more than half of the companies have female NEDs on their boards in 2010.

 hteoh@sph.com.sg