|Companies are encouraged to consider the use of contractual provisions to allow the company to reclaim incentive components of remuneration from executive directors and key management personnel in exceptional circumstances of misstatement of financial results, or of misconduct resulting in financial loss to the company.|
Guidelines 8.2 and 8.3 recommend the implementation of remuneration structures that reward EDs and KMP based on performance and Long-Term Incentive schemes (LTIs). This could result in remuneration that rewards short-term performance goals which carry inherent risks that could result in adverse outcomes only in the future. Such adverse outcomes might be unintended or unforeseen, while others could be foreseen but irresponsibly ignored due to the attractive short-term rewards. In some cases, deliberate misstatements of financial results or other misconduct may occur so that management can reap short-term rewards.
This Guideline advises the company to ensure that appropriate triggers and clawback provisions are built into the contract. This helps avoid rewarding employees who are shown, with the advantage of hindsight, not to have deserved the rewards in the first place.
B. SGX Disclosure Guide
C. Related Rules and Regulations
D. CG Guides
- RC Guide 4.7: Remuneration and Risk Alignment [Executive Remuneration].
- RC Guide Appendix 5H: Clawback and Malus Provisions [Equity-Based Remuneration].
E. Related Articles
- “Addressing remuneration matters as set forth in the new Code of Corporate Governance” by Na Boon Chong. (89KB)
- “NED fees face upward pressure” by Jon Robinson. (415KB)