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High Coroprate Salaries Proven to be a Scam Game, so Why Pay Singapore’s Leaders Millions a Year?

One study says top corporate salaries are a scam game, another that “executive managers’ pay is still determined by simplistic measures of performance that bear little relation to long-term drivers of companies’ value, according to an analysis of pay at FTSE 100 companies over the past decade”.

If so so how can our ministers’ salaries that are pegged to private sector pay be “reasonable”? Private sector salaries are “rigged”, not the result of rationality or even supply and demand..

How the salaries of top corporate executives are calculated is a scam according to the Economist, citing an academic study. (The Economist advocates things like GST, low income and corporate taxes, minimal welfare and charging owners who use their cars. All very PAP. I’ve called it the PAP’s bible.)

So the u/m is relevant in the light of PM’s comments about “reasonable”* salaries for ministers. (What do you think?)

You will be shocked, shocked to learn that your worst suspicions are confirmed.

Yes, firms that hire pay consultants pay their executives 7.5% more than those who don’t.

Yes, companies that hung on to their multi-service consultants paid their executives 10% less than those that switched to specialist consultants.

Executives who work at firms where the board hired the consultants earned 13% less than when the consultants were hired by the management themselves. When executives get a big pay rise, their companies are less likely to replace their consultants in the following year.

The authors conclude that

 “our study finds strong empirical evidence for the hiring of compensation consultants as a justification device for higher executive pay.

So, be very suspicious of arguments that higher executive pay is the result of the “war for talent”, the unique importance of the CEO in a globalised world, or whatever. If such arguments were true, it should make no difference whether consultants are hired or not. This smacks more of the famous lickspittle courtier of Louis XIV, the Sun King, who, when asked the time, replied “It is whatever time your majesty pleases”. “Whatever pay your majesty pleases” is the modern equivalent.”

The Financial Times reports:

“Research from CFA UK and Lancaster Business School, which examined executive remuneration over the 10 years from 2003-2013 at 30 FTSE 100 companies, found there was scant correlation between the key performance indicators that companies highlighted to shareholders and the measures used to incentivise and reward senior staff.

This is what Prime Minister Lee Hsien Loong said in a Channel NewsAsia interview while he was in Beijing last month:

*Q: In China, particularly at the government level, the topic of Singapore’s clean government is often discussed. But very often people attribute its success to high salaries for office-holders. Do you think it is that simple?A: I think the topic of high salaries can cause a sharp reaction. In principle, we are not talking about high salaries, what we want are realistic and correct salaries. We want talent, we want morally upright people, and we want the right people for the right jobs. The most important job must be done by the most capable, the most trustworthy person. If we want the services of such capable and trustworthy people, then we must treat them fairly and equally. We must have a practical system – a realistic salary.At the same time our requirements are strict – your performance must be good. Legally, you absolutely cannot do anything you are not supposed to do, and if that happens, you will be punished under the law, and the punishment will be severe. So this is not just a question of salaries, it is also a matter of the system, an issue of transparency, and our whole culture.Channel NewsAsia report on his interview by a Chinese television channel.

This commentary was first published on Thoughts of a Cynical Investor.
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