PETALING JAYA: The total board remuneration of companies in the FTSE Bursa Malaysia Top 100 Index (FBM 100) declined 11.7% in 2019 to RM1.34 billion compared with 2018, largely driven by the 14.5% drop in the remuneration of executive directors (EDs) to RM1.12 billion, although remuneration of non-executive directors (NEDs) increased 6.2% to RM223 million.
This was revealed in the Securities Commission Malaysiaâs (SC) Corporate Governance (CG) Monitor 2020 released yesterday, which shifted its focus from CEO remuneration in the CG Monitor 2019 to board remuneration of the constituents of the FBM 100 as of December 2019.
The top 20 highest paid boards received significantly higher remuneration than their respective sector medianâs remuneration. The overall median board remuneration for listed companies on the FBM 100 is RM7.4 million, a 2.6% drop from a year ago.
The top four sectors with the highest median total board remuneration are industrial products & services (RM11 million), telecommunications & media (RM10.8 million) followed by property (RM8.5 million) and plantation (RM8.5 million). Transportation & logistics marked the lowest median total board remuneration at RM4.2 million.
When comparing the level of remuneration in 2018 and 2019, 52 boards recorded an increase in total remuneration while 46 boards recorded a decrease in total remuneration in 2019.
From the 10 listed companies with the highest total board remuneration, six were also on the top 10 listed companies with the highest paid CEOs which was reported in CG Monitor 2019. This suggests that a significant portion of total board remuneration of these companies can be attributed to the CEOâs remuneration.
Generally board remuneration is expected to decrease in 2020 and 2021 due to the impact of Covid-19.
âWeâre not saying that the board remuneration, whether increasing or decreasing, is a good thing, because at the end of the day, it is the right size of remuneration which will drive performance. It is important to step up efforts to ensure that the directors are rightly remunerated,â the SC said in a technical briefing.
In 2019, the top 10 highest paid boards were mainly family-controlled companies (seven out of 10) which tend to have boards with a larger proportion of EDs. This is similar to the findings in the CG Monitor 2019 â where the top 10 highest paid CEOs were also mainly from family-controlled companies.
The top 10 boards with the highest total NED remuneration were mostly government-linked companies (GLCs) (six out of 10). This is in contrast to the CEO remuneration of GLCs which were found to be relatively lower than other CEOs in the top 100; as highlighted in CG Monitor 2019.
Notwithstanding an increase, NED remuneration still receives overwhelming approval from shareholders, including major institutional funds which collectively hold substantial proportion of shareholding.
Companies with higher market capitalisation have higher NED remuneration compared with those with lower market capitalisation. Companies which are of relatively the same size (by market capitalisation) also record large variation in the remuneration received by their NEDs. These variations suggest that there may be other factors driving the differences in NEDs remuneration.
Based on the disclosure of the top 30 shareholdings of these companies, institutional investors held an average of more than 50% of total shareholdings, indicating that they collectively are in a position to ensure that the remuneration is fair and commensurates with the role and performance of the director.
Meanwhile, remunerations received by the non-executive chairman of these listed companies range widely, from RM500,000 to RM2.5 million with an average of RM1.2 million.
The chairman of AMMB Holdings Bhd, the highest paid non-executive chairman, received a remuneration amounting to RM2.5 million, which represents 50% of remuneration received by all NEDs of the company. This is followed by the chairman of Malayan Banking Bhd who received a remuneration of RM1.8 million.
The SC also noted that smaller companies have adopted a more transparent approach with regards to disclosure of remuneration of senior management on a named basis. The adopters include Caely Bhd, Y&G Corp Bhd and Timberwell Bhd.
