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ASIA: "Taxation of Cross-Border Mergers and Acquisitions: Singapore". 14-page report by KPMG.
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backASIAtalk June, 2009
Companies in Singapore are exercising restraint in compensation for top executives
According to a recent study by Hewitt Associates, a global human resources consulting and outsourcing company, 72 percent of organizations surveyed in Singapore expect to pay smaller bonuses to top executives in 2009. The study findings also revealed that 17 percent of organizations are not expecting to pay any bonus in 2009.
The Hewitt Asia Pacific Executive Compensation Hot Topic survey, which focuses on executive compensation practices in the current turbulent economy, was completed in January 2009.
When compared to the rest of Asia Pacific, responses by organizations in Singapore appear to be quite conservative. The prevalence for not providing a bonus is greater for Singapore than in other markets in Asia Pacific. In addition, the prevalence of organizations expecting to pay higher than target bonus is only 11% in Singapore, half that of the rest of Asia Pacific. Organizations that expect to pay higher bonuses are found in services and agricultural-related industries.
"The uncertain impact of the global recession is the key concern of most organizations. Smaller bonus payouts for top management teams this year shows that employers in Singapore are willing to make short-term sacrifices during this time of crisis for longer-term business sustainability," said Lee Shiau Fei, Hewitt's senior executive compensation consultant for South East Asia.
When it comes to merit increases for top executives, Singapore organizations are also taking a conservative view compared to the rest of Asia. Almost half of the organizations surveyed indicated that they may not provide merit increases to their top executives this year. Of those providing increases, the median expected amount is three percent. This is the lowest figure in the region, while the highest merit increase is in India at eight percent.
In addition to base pay and annual bonus, long-term incentives in the form of equity compensation usually make up a significant portion of a top executive's compensation. The market observation is that there will be a decline in the value delivered as a result of lower equity valuations as well as lower corporate performance levels.
"Equity compensation is expected to be under severe pressure given the current bear market conditions. Such compensation vehicles lose their attractiveness to provide the desired incentive value to recipients. Our survey findings show that a third of survey respondents have more than 75 percent of their outstanding stock options being currently underwater," Ms Lee said.
Stock options 'underwater' means the market share price is lower than the exercise price of the stock option. Hence, executives are not able to enjoy any immediate value from the stock option awarded to them, and thus are less appealing until markets recover. However, 95 percent of the organizations with underwater options are choosing not to do anything with this situation, with only five percent planning to exchange the 'lost' value with cash.
About Hewitt's Asia Pacific Executive Compensation Hot Topic Survey
The Hewitt Asia Pacific Executive Compensation Hot Topic Survey 2008/09 was specially initiated to assess the impact of the global economic downturn on executive pay and market reactions on incentive programs in Asia Pacific. The survey has garnered 529 responses from 312 organizations across 12 countries in the region. These are companies across various industry segments including: energy, oil & gas; financial services; fast-moving consumer goods; pharmaceutical, hi-tech, manufacturing; engineering and services.
The study focuses on how companies are expecting to execute the merit increases, bonuses and equity-based incentives for their top executives. In times of strong market conditions, these rewards are highly anticipated by employees, especially those at the helm.
Source: Hewitt Associates Singapore - GAI
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