(1) Thread: Topic of GLC management compensation came up last night. First we need to define what this entails. Is it GLIC, or listed GLCs or statutory boards. We use the GLC definition too wide and freely across all three (another thread, another day).

(2) We cannot compare the salary of a listed bank CEO for example, and assume everybody is within this wide definition of GLC is paid similarly. The definition & remuneration gap is huge. Must have a fairer basis of comparison.

(3) The compensation at statutory boards are very low. Add that to poor internal controls and lack of limit of authority, there is room for significant abuse to happen here. Perhaps this is why it’s very popular as rewards.

(4) Even then, we have to ask the question, are these statutory boards there for commercial reasons (profit making) or grant disbursement (cost centre). Remuneration needs to reflect this, and not painted with same brush across. Former takes risk, latter is more operational.

(5) For listed GLCs & GLICs which I will focus on here, there are enough internal controls, and market intervention to regulate pay. Thing is are we asking the right questions, and are shareholders pressing on this.

(6) Listed GLCs management pay is skewed heavily towards fixed (salary) rather than variable (bonus & stock options). We should be looking at remuneration as total compensation (fixed + variable).

(7) Another issue is the lack of transparency on what is the CEO / management KPIs. How is success measured? What’s the benchmark? Only be knowing this, can we determine is compensation is high.

(8) what can be done immediately:
(i) making KPIs transparent, and measurable
(ii) paying more in stocks (align interest better with all shareholders)
(iii) communicating how the benchmarking was done

(9) I’m against the suggestion of cutting pay & regulating this. Instead package should be redone to align interest better with all shareholders. So if a CEO makes a stupid decision which results in shareholder value being wiped out, so does his compensation.

(10) KPIs can include wide spectrum of initiatives such as the normal financial aspects; profitability, margins, cost control, & longer term structural challenges; wage gap between employees & senior management, sustainability, diversity. All must be measurable.

(11) If the KPIs above are all achieved within prescribed period, and communicated clearly, no reason why executives shouldn’t be paid well. Key here is being able to craft measurable KPIs and being transparent about it.

(12) One red flag of KPIs is share price. As a fund manager, I’d cringe when CEOs told us their share price was KPI. It incentivised them in the wronv way, making acquisitions which pushed value of company up but created value destruction for shareholders.

(13) All this requires Nomination & Remuneration Committee & Board that spends time discussing these factors and holding CEO and management accountable.

(14) Reading these 13 tweets above, it’s easy to say “it’ll never happen here”. It can. Much of this is in the hands of Boards, not the government. If an underperforming well paid CEO is staying on, it’s not his fault, it’s the Board.