SINGAPORE – Companies may soon be compelled to disclose what goes into how their executives are paid, under proposals mooted by regulators on April 22.
The move addressing that lack of transparency is key to rejuvenating the Singapore stock market, where more than 60 per cent of the largest listed companies do not publicly disclose the performance and financial indicators that determine their executive directors’ pay.
This creates an information gap between companies and investors, which could erode investor confidence, said the Singapore Exchange Regulation (SGX RegCo).
Without detailed information to show whether remuneration is aligned with value delivered to shareholders, investors may not be able to make informed judgments on company and management performance.
Under current regulations, companies have to disclose only the remuneration of directors and the chief executive officer in their annual reports, a requirement that was mandated in 2023 for the financial years ending on or after Dec 31, 2024.
But factors determining executives’ remuneration have a direct bearing on management behaviour and corporate decision-making, and the significant number of companies that keep this information secret could be detrimental to the market, experts said.
“Insufficient disclosures can create risks for both companies and capital markets as they heighten perceptions of governance risk, weaken investor trust and exacerbate information asymmetry,” said Mr Lee Wei Hock, Singapore assurance leader at EY.
This may drive investors to price in more risk and lower valuations, especially in markets that value strong governance and transparency, he said.
SGX RegCo on April 22 proposed requiring companies to disclose the factors used to determine executive pay in their annual reports.
These factors could include total shareholder return and return on equity, as well as operational and sustainability metrics such as on-time delivery rates, customer satisfaction and emissions levels.
Listed companies will have to explain the alignment between their chosen indicators and long-term value creation objectives, taking into account their strategy and circumstances.
This new information will allow investors to assess whether a company’s value creation objectives and performance indicators are appropriate to its circumstances, and whether they are aligned with investors’ interests.
It also allows investors to evaluate management’s performance against its stated objectives.
SGX RegCo said its proposal comes after investors expressed strong interest in “understanding the indicators that would determine such remuneration, and how these indicators relate to the company’s long-term value creation objectives”.
The proposed disclosure requirement would not apply to non-executive directors, who are typically paid in fixed fees, as they are not involved in the day-to-day management of the company and the execution of its strategy.
By increasing transparency and engagement with investors, the proposed disclosures would significantly raise investor confidence and help them make better informed decisions, experts said.
“When remuneration disclosures articulate how incentives support sustainable growth, risk management and capital discipline, they help investors better assess management quality and future performance potential,” said EY’s Mr Lee.
Better remuneration disclosure was among the set of proposals that SGX RegCo put forth for public consultation, which also included mandatory disclosure for dividend policies as well as enforcing investor relations platforms.
The regulator said its proposals aim to raise disclosure standards and push companies to focus more on creating value for shareholders.
This will complement a broader set of measures to revitalise Singapore’s equities market, such as the $30 million Value Unlock initiative offering two grants to help firms improve their corporate strategy and step up their investor relations.
The new disclosure requirements are designed to ensure that listed companies build on the skills and platforms afforded to them under Value Unlock, SGX RegCo CEO Tan Boon Gin said.
“Our job as regulators is to promote transparency, motivate best practices and drive market discipline. We see these rules as pushing both boards and shareholders to think more about value creation and forming a foundation for two-way engagement.”
The consultation phase will end on May 22 and the new rules are expected to be implemented in phases from Jan 1, 2027, thus affecting annual reports filed in 2028.
Both issuers and investors stand to benefit from these reforms, as valuations depend not only on financial results but also on how companies communicate. Better disclosure and clearer messaging on strategy could improve liquidity and investor participation, especially for smaller firms with limited analyst coverage.
Mr David Gerald, president and CEO of the Securities Investors Association (Singapore), or SIAS, said investors now want clear, consistent information that goes beyond past results to explain how companies manage risks, execute strategy and create long-term value.
“High-quality disclosures can help investors better evaluate the company’s resilience, adaptability and ambition, and signal accountability from the leaders of the organisation and preparedness in a complex environment,” he said.
While this transparency reduces uncertainty and can positively influence perceptions of risk over time, investors must also play an active role by reading disclosures critically, questioning vague or generic explanations, and seeking clarity through engagement with companies.
“Generally speaking, the market and investors do not like surprises,” said Mr Ong Hwee Li, CEO of SAC Capital.
“When issuers are consistent in both their performance and investor relations efforts, it strengthens credibility over time. This consistency builds investor trust, which can support stronger investor confidence. Issuers enjoy better valuations in the long run.”
EY’s Mr Lee said that the impact of the proposals would ultimately depend on the quality and intent behind these disclosures.
“Company disclosures should clearly explain how governance decisions support long‑term value creation, capital discipline and sustainable performance, rather than simply meeting minimum disclosure requirements.”
Beyond pay disclosures, companies will also need to set out their dividend policy, showing how they plan to use profits to create value for investors.
SGX RegCo said a “sizeable proportion of issuers” have elected not to disclose their dividend policy, which could undermine investor confidence and contribute to persistent valuation discounts.
Requiring this disclosure would give investors greater clarity on future payouts, helping them make more informed investment decisions.
Issuers would also be required to explain the reasons for any deviation from their dividend policy.
The regulator added that the proposed new rule does not mandate that a dividend must be paid, nor does it prescribe any particular dividend approach, payout ratio or quantified target.
However, companies that currently do not have a fixed dividend policy would be required to adopt and disclose one.
SIAS’ Mr Gerald said the new regulation would help investors better understand how boards balance reinvestment, capital needs and shareholder returns.
Under the proposal, listed companies must disclose and maintain an investor relations policy to facilitate regular two-way communication with investors.
Such engagement activities must also be listed in their annual reports.
They will also be required to maintain a website that would serve as a readily accessible and centralised platform for key investor-facing information and documents, such as annual reports and annual general meeting minutes.
Such documents are currently already available on issuers’ filings on SGX’s website, but a centralised platform would make them more accessible to investors.
Issuers are also encouraged to disclose on their websites meaningful investor feedback and how it has been incorporated into decision-making.
SAC Capital’s Mr Ong noted that current gaps in the investor relations space would need to be addressed in order for the new regulations to work.
One key issue is that there is currently no requirement for issuers to engage investor relations firms or hire dedicated personnel for such roles.
As such, only larger issuers typically have investor relations teams as they have a broader institutional investor base and a greater need for consistent investor communication compared with smaller firms.
“There is also a lack of formal academic programmes focused on investor relations, as it is often treated as a subset of communications. As a result, the talent pool remains limited due to low awareness of investor relations as a distinct career path and function,” Mr Ong said.
