The Board should establish a Remuneration Committee ("RC") with written terms of reference which clearly set out its authority and duties. The RC should comprise at least three directors, the majority of whom, including the RC Chairman, should be independent. All of the members of the RC should be non-executive directors. This is to minimise the risk of any potential conflict of interest. The Board should disclose in the company's Annual Report the names of the members of the RC and the key terms of reference of the RC, explaining its role and the authority delegated to it by the Board.
 
A. Explanation

This Guideline recommends the establishment, composition and disclosure requirements of an RC.

It encourages the setting up of a RC – a common approach that enhances responsible governance of director and executive remuneration, especially with contemporary concerns about, and scrutiny on, pay matters. A RC helps the Board to determine the level and structure of remuneration to be paid to Board members and executives in line with their performance.

The Guideline proposes that the RC comprises at least three members, all of whom should be Non-Executive Directors (NEDs), and the majority being Independent Directors (IDs). The reason is to minimise conflicts of interest.

Indeed, the greater concern (internally and externally) about directors’ pay is on the remuneration levels of the Executive Directors (ED) rather than NEDs. The NEDs’ fees are generally straightforward, and often comprise a fraction of EDs’ compensation. The perceived excessive levels of senior executives’ pay, as well as the ratio of top executives’ pay to average workers’ pay, have been subjects of considerable public debate globally.

As with all Board Committees, the RC needs to be established with a well-defined written terms of reference that set out its duties and authorities.

The Guideline further requires that these duties and authorities, together with the names of the RC members, be disclosed in the annual report.

 

B. SGX Disclosure Guide
  • Nil.

 

C. Related Rules and Regulations
  • SGX MR 849 and CR 848: Terms of Schemes.

 

D. CG Guides
  • RC Guide 1.1: Introduction [RC Composition].
  • RC Guide 1.2: Structure and Authority [RC Composition].
  • RC Guide 1.3: Terms of Reference [RC Composition].
  • RC Guide 1.7: Selection of RC Members [RC Composition].
  • RC Guide Appendix 1C: Scope of an RC’s Responsibilities [RC Composition].
  • RC Guide Appendix 1D: Sample RC Terms of Reference [RC Composition].
  • RC Guide 5.7: Administration [Equity-Based Remuneration].
  • RC Guide 7.2: Role of the Board [Stakeholder Engagement].

 

E. Related Articles

 

eGuide to CG Code
Overview
Board Matters
Principle 1
Guideline 1.1
Guideline 1.2
Guideline 1.3
Guideline 1.4
Guideline 1.5
Guideline 1.6
Guideline 1.7
Principle 2
Guideline 2.1
Guideline 2.2
Guideline 2.3
Guideline 2.4
Guideline 2.5
Guideline 2.6
Guideline 2.7
Guideline 2.8
Principle 3
Guideline 3.1
Guideline 3.2
Guideline 3.3
Guideline 3.4
Principle 4
Guideline 4.1
Guideline 4.2
Guideline 4.3
Guideline 4.4
Guideline 4.5
Guideline 4.6
Guideline 4.7
Principle 5
Guideline 5.1
Guideline 5.2
Guideline 5.3
Principle 6
Guideline 6.1
Guideline 6.2
Guideline 6.3
Guideline 6.4
Guideline 6.5
Remuneration Matters
Principle 7
Guideline 7.1
Guideline 7.2
Guideline 7.3
Guideline 7.4
Principle 8
Guideline 8.1
Guideline 8.2
Guideline 8.3
Guideline 8.4
Principle 9
Guideline 9.1
Guideline 9.2
Guideline 9.3
Guideline 9.4
Guideline 9.5
Guideline 9.6
Accountability and Audit
Principle 10
Guideline 10.1
Guideline 10.2
Guideline 10.3
Principle 11
Guideline 11.1
Guideline 11.2
Guideline 11.3
Guideline 11.4
Principle 12
Guideline 12.1
Guideline 12.2
Guideline 12.3
Guideline 12.4
Guideline 12.5
Guideline 12.6
Guideline 12.7
Guideline 12.8
Guideline 12.9
Principle 13
Guideline 13.1
Guideline 13.2
Guideline 13.3
Guideline 13.4
Guideline 13.5
Shareholder Rights and Responsibilities
Principle 14
Guideline 14.1
Guideline 14.2
Guideline 14.3
Principle 15
Guideline 15.1
Guideline 15.2
Guideline 15.3
Guideline 15.4
Guideline 15.5
Principle 16
Guideline 16.1
Guideline 16.2
Guideline 16.3
Guideline 16.4
Guideline 16.5
eGuide Glossary
Disclosure of CG arrangements
The Role of Shareholders

Copyright © 1998 - 2017 Singapore Institute of Directors. All rights reserved.