Focus View
Consider stakeholder interests in directors’ pay
FocusM team | 09 Feb 2018 00:30
The recent KPMG Report on Non-Executive Directors’ Remuneration 2017 is quite revealing. The report says the top 300 Bursa Malaysia companies (by market capitalisation) paid an average of RM162,000 per annum to their non-executive directors (NEDs). 

This is an increase of 33% from the average NED remuneration of RM122,000 in 2013, says KPMG. 

The report reveals financial sector NEDs received the highest pay. This, says KPMG, is due to the high level of regulations imposed on banks, implying that the job of directors is very onerous and stressful.

There is no argument on whether the job of a director is stressful or otherwise. But surely, some KPIs must be attached to their remuneration beyond merely providing shareholder value to the company? 

Perhaps, remuneration to the entire board, not just NEDs, should be judged beyond shareholder value, and to include stakeholder value as well. Looking after stakeholders of a company also means looking after the welfare of its employees. 

At a time when employees of banks, and construction and manufacturing companies are staring at the prospect of losing jobs and facing various other job uncertainties, it is questionable whether these directors should be rewarded so well. 

Going beyond shareholder value to include stakeholder value would impress upon the board to ensure it also looks into creative ways to preserve jobs while increasing corporate productivity.

Merely cutting the workforce and reporting gains in terms of corporate savings to benefit shareholders will not do.
 
Beyond the bottom line, directors should also be rewarded on how many jobs they preserve, while increasing corporate productivity and efficiency. 

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