WHEN compared against a company’s share price performance, the Marco Polo Marine : 5LY 0% chief executive’s pay is seen as good value, UOB Kay Hian (UOBKH) has found.

A report released on Thursday (Jun 22) by the research house noted that the integrated marine logistics group saw a 52 per cent share price gain, against its CEO Sean Lee’s estimated pay of S$750,000 in FY2022, standing out among small and mid-cap companies. Marco Polo Marine reported Lee’s salary to range from S$750,000 to under S$1 million in its FY2022 annual report.

In contrast, the most overpaid CEOs relative to company’s share price performance seems to be Rex International : 5WH 0%’s Mans Lidgren and UMS Holdings : 558 0%’ Andy Luong.

Rex’s Lidgren was paid between S$4 million and S$4.3 million for FY2022, against a share price decline of 28 per cent.

UMS’ Luong was paid S$7.4 million, against a share price drop of 19 per cent. However, UMS recorded a 85 per cent year-on-year increase in its FY2022 net profit, while Rex International fell by 99.6 per cent.

To determine what was considered “fair compensation”, UOBKH compared the CEO’s pay against the company’s share price performance and the return on equity (ROE).

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The research team also noted that CEO pay at Seatrium : S51 0%, Sembcorp Industries : U96 0% and Keppel : BN4 0% seemed “well-justified” as the industrials sector outperformed the Straits Times Index (STI) in 2022.

When CEO pay is compared to ROE, UOBKH found that large-cap companies that recorded an ROE of more than 15 per cent in 2022 appeared to have paid their CEOs fairly.

These companies include SGX : S68 0%, StarHub : CC3 0%, ST Engineering : S63 0%, Singapore Airlines : C6L 0% (SIA) and Yangzijiang Shipbuilding : BS6 0%(YZJ). RH Petrogas : T13 0% and PropNex : OYY 0%, meanwhile, were among small-to-mid-cap companies which did the same.

UOBKH had determined fair compensation by looking at the company’s 2022 net profit after tax (NPAT) as a multiple of the CEO’s pay. This will show whether a CEO has “added value to their company and if this is reflected in their pay”.

Companies which “generated the most value” out of their CEOs include YZJ, Singtel : Z74 0% and SIA, the research team said.

On average, CEOs of the Singapore companies that UOBKH covered were paid S$3.6 million.

Although YZJ chief executive Ren Letian was considered the most underpaid on an absolute basis at S$78,229, the research team noted that he received around S$8.3 million in dividends in 2022.

Notably, Temasek-linked companies (TLCs) made up seven of the top 20 highest-paid CEOs in UOBKH’s analysis.

Among these companies, DBS : D05 0%’ Piyush Gupta was the most highly paid at S$15.4 million, followed by Keppel’s Loh Chin Hua at S$8.1 million and CapitaLand Investment : 9CI 0% (CLI) Lee Chee Koon at S$6 million.

UOBKH said that the pay for TLCs were “relatively fair” as DBS had the highest ROE in the financial sector. Both Keppel and CLI also recorded material share price gains of 49 per cent and 13 per cent respectively, comfortably outperforming the STI in FY2022.

“Ultimately, the goal is to strike a balance between attracting and retaining top talent while ensuring that CEO compensation is reasonable, justifiable, and aligned with the long-term success of the organisation,” said UOBKH analyst Adrian Loh.