According to the TR Emeritus article “Singtel defends its big remuneration to senior staff” (Jun 24) – “It is important that our stakeholders and the public have a balanced and complete view of how we remunerate our CEO and senior management.
We have a pay-for-performance philosophy that measures and rewards short-term, mid-term and long-term performance. Short-term performance is measured through a balanced scorecard approach which rates individuals against financial and non-financial KPIs. Mid-term performance is rewarded by a value-sharing bonus which is dependent on the overall economic profit of the group i.e. excess return over risk-adjusted cost of capital.
This is a true measure of value creation for our shareholders and is not linked in any way to the vagaries of the stock market. It is important to note that this bonus can be clawed back if Singtel does not continue to deliver sustainable value.
Lastly, there is a long-term incentive scheme in the form of performance shares to reinforce the delivery of long-term growth measured by total shareholder returns in relative and absolute terms.
Mr Israel said that Singtel’s total shareholder return for this year was 25% compared to 11% for the Straits Times Index and 12% for the MSCI Asia Pacific Telco Index.”
The internal rate of return of all cash flows to an investor during the holding period of an investment”
Total shareholder return 25% for 1 year justifies 50% increase in remuneration?
Don’t you find it somewhat amusing that whilst talking about “long-term growth” – we cite only one year’s ”total shareholder return for this year was 25% compared to 11% for the Straits Times Index” to justify the as much as 50 per cent increase in officers’ remuneration?
Singtel’s poor shareholder return is legendary?
Let’s look at Singtel’s “shareholder return” in history.
In the annals of stock market history – Singtel’s “shareholder return” is argubly legendary for its poor performance.
14 years to recover back to IPO price?
Shortly after its IPO in 1993 at the price of $3.61 – it plunged to a low of about $1.19 in 2002, and took almost 14 years to recover to above $3.61 in 2007. Even in 2013, after about 20 years – its price was as low as below $3.61.
At its current price of $4.24 – it translates to an annualised return on its share price (without dividends) of only about 0.7 per cent per annum.
Shareholder value ranked bottom 8 out of 5,069 companies?
As to “mid-term performance is rewarded by a value-sharing bonus which is dependent on the overall economic profit of the group i.e. excess return over risk-adjusted cost of capita” – according to the book “Southeast Asian Affairs 2002″ (page 296) – “a Wealth Added Index compiled by consulting firm Stern Steward ranked 5,069 largest quoted companies by shareholder value created (or destroyed) between June 1996 and June 2001. Singtel was ranked number eighth among the bottom 25.
It suffered from both lessons drawn from the ranking: one, costly acquisitions can destroy value and two, it is a volatile market where the quest for shareholder value can create as many spectacular failures as successes.
Shareholder value US$29.9b destroyed?
Singtel’s cost of equity at 8 per cent exceeded total shareholder return at -10 per cent with US$29.9 billion destroyed for the period under study.”
Ever claw back remuneration?
As to “It is important to note that this bonus can be clawed back if Singtel does not continue to deliver sustainable value” and “there is a long-term incentive scheme in the form of performance shares to reinforce the delivery of long-term growth measured by total shareholder returns in relative and absolute terms” – has any officers’ remuneration ever been clawed back in its history, given the dismal historical performance?
Analogy – ncrease remuneration after every market or stock crash?
Also, as to “total shareholder return for this year was 25% compared to 11% for the Straits Times Index” – to justify the as much as 50 per cent increase in officers’ remuneration – as an analogy – can you imagine companies whose stock price or the stock market has dropped a lot – giving a very high increase in remuneration to officers because the recovery in price and dividends was very high for the year following the steep drop or a drop for a prolonged period of time?
The Singtel fiasco?
Since Singtel’s shareholder return and remuneration is in the limelight now – perhaps we should revisit the issue of the appropriateness of the process which led to such a high IPO price and poor historical performance of the largest stock by capitalisation in Singapore and the stock which is owned by the most Singaporeans.
Win battles lose war