Remunerating Directors Sitting on Subsidiaries

Remunerating Directors sitting on Subsidiaries

Lim Chin Han The Backdrop The role of Directors in corporate Malaysia is continuously changing, becoming more onerous and more complex almost on a daily basis, with corporate governance requirements being regularly issued. Directors are increasingly being made responsible and accountable for decisions made by the Board as a whole, and more importantly, are increasingly open to penalisation (both financial and censures) from the relevant authorities. For all the benefits of being a Director (prestige, networking, reputation, power, etc.) many are beginning to weigh it against the costs and pressures of being a Director in this current environment. In a recent survey done by PricewaterhouseCoopers however, one Director pointed out that the Code of Corporate Governance („Code‟) “only emphasises what Directors were supposed to be doing all along but failed to do” and there were no “additional” responsibilities as such. Although this might indeed be the case, it is also clear that in the past the “punishments” were not formally stated. So, a formalisation of Director responsibilities has a peripheral effect of allowing Director performance to be measured, and censured when non-compliant.

Board Remuneration As such, the remuneration element of Board membership is coming under more scrutiny by the Boards and Directors themselves. From two remuneration surveys done by PricewaterhouseCoopers, when the Code was issued (2001) and recently (2004), a few key trends are quite clear:  Board sizes have increased, with the addition coming from additional Independent NonExecutive Directors  2004 levels are significantly higher than 2001 levels for all categories of Directors including Chairmen, Independent Non-Executive Directors and Non-Independent Directors  Highest percentage increases in remuneration are for Non-Executive Directors  Committees are increasingly common, with almost all companies with the standard suite of...