Source:
https://scmp.com/article/285079/pay-directors-put-under-review-after-complaints

Pay of directors put under review after complaints

The Hong Kong Society of Accountants has started a review of directors' salaries following several recent highly lucrative remuneration packages which have been handed out to executives.

The chairman of the society's corporate governance committee, Edward Chow Kwong-fai, said the move followed complaints by minority shareholders and media reports.

'We think it's time to review the whole issue,' he said.

According to annual reports, numerous companies that suffered huge losses or significant declines in net profit last year awarded relatively high remuneration packages to their directors.

In most cases, these directors were also the companies' major shareholders.

Examples included garment-manufacturer Easyknit International Holdings, which reported a loss of $543.47 million last year, compared with $112.48 million net profit the previous year.

The company paid $43.93 million for directors' remuneration, a 404 per cent increase year on year.

Another company, CCT Telecom, saw its losses widen to $356.58 million in the year to December 31. At the same time the directors' payroll increased more than twofold to $26.26 million.

The HKSA set up a working group early this year to examine listed companies' remuneration policies.

A possible change would require each listed company to set up a remuneration committee - consisting of executives and independent directors.

Mr Chow said this practice would provide a check-and-balance system to ensure directors remuneration was set in a fair manner.

Another option would be to require companies to increase disclosure on remuneration.

'A check-and-balance system [on directors' remuneration] is definitely needed, it's just a matter of which system best suits the needs of Hong Kong,' he said.

The working group will submit a report to the Stock Exchange of Hong Kong, which will propose a framework on directors remuneration policy.

'We will not set a benchmark or pay scale on directors' remuneration. How much to pay for a director should be a shareholders' decision.' 'What we emphasised is shareholders should be given meaningful disclosure so that they are well informed to make a decision and have a chance to vote.' Mr Chow said this would be a second step for listed companies to move towards higher corporate governance standards.

Last year, the committee proposed to the exchange that each listed company should set up an audit committee - composed of non-executive directors - to advise and independently review their financial reporting process, internal controls and the adequacy of the audit function.

The exchange has imposed the requirement since January 1, in a bid to promote greater accountability and transparency.