SingTel – Kim Eng

A CEO Who Deserves Every Cent

A fair day’s wage for a fair day’s work. For running an organisation of SingTel’s complexity and the most highly valued, most profitable Singapore company to boot, SingTel CEO Chua Sock Koong is fairly and not excessively compensated. Arguably, Ms Chua has made a significant contribution to improving SingTel’s executive remuneration system since she stepped up to the role in 2007. We currently have a SELL call on SingTel (with a SOTP-derived TP of SGD2.82) but this is certainly not due to the way its top executive is paid.

Good value for money. Despite our currently negative view on the stock, SingTel’s recently-released FY3/12 annual report showed that Ms Chua has given good value for what she was paid. In FY3/12, she received SGD4.9m in cash compensation, putting her just somewhat above the median for other CEOs of similar stature in Singapore, although SingTel is one of only two Singapore companies that earn an annual net profit of over SGD3b (excluding the Jardine Group).

Executive pay tightly correlated to total shareholder return. In the past few years, SingTel has linked its CEO compensation to Total Shareholder Return (TSR), a benchmark that combines both capital appreciation and dividends. In Ms Chua’s case, this tight correlation is not so surprising as she was group CFO before being appointed to the CEO position in April 2007, and she had played a key role in developing SingTel’s remuneration system. This correlation did not appear to have been so clear with her predecessor, Mr Lee Hsien Yang.

Yin and yang, night and day. While Ms Chua’s compensation has been more closely related to TSR, Mr Lee’s had at times lagged shareholder returns, particularly in FY3/04 when TSR rose 79% while Mr Lee’s pay rose by only 32%. This might have led to the big increase in his remuneration when he stepped down in 2007. In Ms Chua’s case, despite the fact that she had also cashed in on her performance shares recently, the discrepancy was not so large.

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