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In a Feb 14 (Wednesday) commentary for CNA, NUS Business School Professor of Accounting Mak Yuen Teen weighed in on the S$4.14 million variable pay cut taken by DBS CEO Piyush Gupta due to service outages last year that had been announced on Feb 7.
Prof Mak, who specialises in corporate governance, wrote that banks could be more transparent when it comes to senior management salaries.
Policies surrounding the pay of senior management and rank-and-file employees should be “subject to appropriate oversight by a truly independent committee,” he wrote, adding that “If the remuneration committee and the board approve a policy that drives the wrong behaviour, then they should bear some responsibility.”
After disruptions to its digital banking services inconvenienced many of its customers last year, DBS said its senior management would be held accountable for these shortcomings and that this accountability would be reflected in their remuneration.
The bank also issued a public apology and said it would use an additional S$80 million to fortify its system resilience.
On Feb 7, The Straits Times reported that Mr Gupta took home S$15.4 million in 2022. Prof Mak pointed out that this made him the highest-paid bank CEO in Asia Pacific for the year.
Assuming that the CEO’s base salary and benefits are unchanged, he likely took home S$11.26 million in 2023, though the exact figure will be known when the bank releases its annual report next month.
Prof Mak traced Mr Gupta’s salaries over the past few years, saying that in 2021, after a two-day service disruption in November, he took home S$13.6 million.
This meant that his remuneration for that year was almost 50 per cent higher than in 2020, although, like at many other banks, top management took a pay cut due to the Covid-19 pandemic that year.
Mr Gupta’s remuneration, including variable pay, has been increasing since 2019, and the 2021 disruptions were not mentioned in the assessment of his performance in the bank’s annual report, Prof Mak added. The CEO was even lauded for leading the bank to its “best year ever in 2021.”
“Mr Gupta’s significant pay cut this year is likely the result of the board exercising its discretion to adjust his remuneration, rather than him not meeting specific key performance indicators (KPIs),” wrote the NUS professor.
He went on to compare how the compensation packages for the CEOs in Singapore’s biggest banks are computed with how this is done in Australia, where “Australian banks’ CEOs were also paid consistently less than their Singaporean counterparts.”
Prof Mak also wrote that when things have gone “badly wrong” in Australian banks, there is a greater degree of accountability, with some CEOs even losing their jobs. The same has happened with banks in Canada and Japan.
Even though there has not been “widespread misconduct” as in the case of Australian banks, he added that there are important takeaways from the findings of the Royal Commission that could be relevant to the local situation.
“First, balanced scorecards that are used by banks may not be achieving their objectives.
Second, there is a need to review remuneration policies at all levels and in different functions.
Third, and most importantly, culture, governance and remuneration are key causes of misconduct – and they are inextricably linked,” wrote Prof Mak, adding:
“Given the significant reliance of our local banks on variable pay to reward their senior management, they need to ensure that their remuneration policies drive the right behaviour.”
https://theindependent.sg/nus-professor-calls-for-stronger-oversight-on-dbs-ceos-pay/
Prof Mak, who specialises in corporate governance, wrote that banks could be more transparent when it comes to senior management salaries.
Policies surrounding the pay of senior management and rank-and-file employees should be “subject to appropriate oversight by a truly independent committee,” he wrote, adding that “If the remuneration committee and the board approve a policy that drives the wrong behaviour, then they should bear some responsibility.”
After disruptions to its digital banking services inconvenienced many of its customers last year, DBS said its senior management would be held accountable for these shortcomings and that this accountability would be reflected in their remuneration.
The bank also issued a public apology and said it would use an additional S$80 million to fortify its system resilience.
On Feb 7, The Straits Times reported that Mr Gupta took home S$15.4 million in 2022. Prof Mak pointed out that this made him the highest-paid bank CEO in Asia Pacific for the year.
Assuming that the CEO’s base salary and benefits are unchanged, he likely took home S$11.26 million in 2023, though the exact figure will be known when the bank releases its annual report next month.
Prof Mak traced Mr Gupta’s salaries over the past few years, saying that in 2021, after a two-day service disruption in November, he took home S$13.6 million.
This meant that his remuneration for that year was almost 50 per cent higher than in 2020, although, like at many other banks, top management took a pay cut due to the Covid-19 pandemic that year.
Mr Gupta’s remuneration, including variable pay, has been increasing since 2019, and the 2021 disruptions were not mentioned in the assessment of his performance in the bank’s annual report, Prof Mak added. The CEO was even lauded for leading the bank to its “best year ever in 2021.”
“Mr Gupta’s significant pay cut this year is likely the result of the board exercising its discretion to adjust his remuneration, rather than him not meeting specific key performance indicators (KPIs),” wrote the NUS professor.
He went on to compare how the compensation packages for the CEOs in Singapore’s biggest banks are computed with how this is done in Australia, where “Australian banks’ CEOs were also paid consistently less than their Singaporean counterparts.”
Prof Mak also wrote that when things have gone “badly wrong” in Australian banks, there is a greater degree of accountability, with some CEOs even losing their jobs. The same has happened with banks in Canada and Japan.
Even though there has not been “widespread misconduct” as in the case of Australian banks, he added that there are important takeaways from the findings of the Royal Commission that could be relevant to the local situation.
“First, balanced scorecards that are used by banks may not be achieving their objectives.
Second, there is a need to review remuneration policies at all levels and in different functions.
Third, and most importantly, culture, governance and remuneration are key causes of misconduct – and they are inextricably linked,” wrote Prof Mak, adding:
“Given the significant reliance of our local banks on variable pay to reward their senior management, they need to ensure that their remuneration policies drive the right behaviour.”
https://theindependent.sg/nus-professor-calls-for-stronger-oversight-on-dbs-ceos-pay/
