|The RC considers all aspects of remuneration including termination terms to ensure they are fair.|
This Provision states that the RC is to consider all aspects of remuneration, including fairness.
Practice Guidance 6 sets out the various aspects of remuneration that should be considered:
- Payments: director's fees, salaries, allowances, bonuses, options, share-based incentives and awards.
- Benefits in kind.
- Key Management Personnel (KMP) termination clauses and payments which should be fair and reasonable, and not overly generous.
- Fair approach that seeks to reward good and not poor performance.
The Provision highlights terms of termination because the termination of personnel can be difficult, particularly when they do not wish to leave the company. The point of termination is not usually a good time to negotiate termination payments. For that reason, as far as possible, clear and comprehensive termination provisions should be established in the contracts of service, so that both parties (employer and employee) are clear at the outset about the consequences of the employee’s exit.
At the same time, at the point of recruitment, highly-in-demand employees may demand golden parachutes prior to joining. The Board needs to ensure that exit payments are not overly generous.
B. Practice Guidance
C. Related Rules and Regulations
- Section 152(7) of the Companies Act: Removal of Directors.
- Section 168 of the Companies Act: Payments to Director for Loss of Office, etc.
D. CG Guides
- RC Guide 4.3: Executive Remuneration Components [Executive Remuneration].
E. Related Articles
- “Termination of directors in a time of retrenchments” by Kala Anandarajah. (190KB)
- “Addressing remuneration matters as set forth in the new Code of Corporate Governance” by Na Boon Chong. (89KB)
- “Improving remuneration governance” by Jon Robinson. (115KB)