StarHub, the Singapore-headquartered telecoms company, has never received an investor query around ESG and executive pay. ESG in general is growing as a topic of conversation but not in how it impacts compensation, even though – unusually for companies in the region – StarHub does in fact link ESG to senior pay, is in the process of formalizing its approach and is happy to discuss its plans.
At present, ‘executives who are responsible for ESG-related KPIs – such as good corporate governance, transparency, diversity, talent management, succession planning, employee engagement, personal data and cyber-compliance – within our operations are rewarded for achieving or exceeding their performance targets,’ says Veronica Lai, chief corporate officer at StarHub. She adds that these ‘rewards are cascaded [down] to various staff in the departments who contribute toward our main corporate targets.’
Lai says investors are increasingly interested in ESG more broadly, if not yet specifically in how it relates to compensation, but the company has already seen the benefits of its ESG-pay link internally.
‘It has given us the impetus for greater clarity in our sustainability strategy and approach, tightened our target setting and [helped] formalize roles and responsibilities,’ she notes.
Now StarHub wants to take this further. ‘We are in the process of formalizing our ESG-pay-link framework to develop a set of metrics applicable across the entire company,’ Lai continues. ‘Once we [have done this], we intend to include this information in our sustainability report to bring greater transparency and credibility.’
Not a talking point
A Willis Towers Watson survey from December 2020 notes that almost 70 percent of firms in the Asia-Pacific region plan to introduce ESG measures into their LTIPs over the next three years, while 61 percent plan to do the same with their annual incentive plans. But few want to go on the record or expand on the brief statements provided in their reporting.
‘Asian companies are behind Europe and North America, both in disclosing their ESG efforts generally and in tying their executive pay to ESG initiatives,’ says Trey Davis, executive compensation leader for Asia-Pacific at Willis Towers Watson.
‘Asian companies are behind Europe and North America, both in disclosing their ESG efforts generally and in tying their executive pay to ESG initiatives,’ says Trey Davis, executive compensation leader for Asia-Pacific at Willis Towers Watson.
‘Partly, Asian companies generally are behind the rest of the world in adopting these kinds of ESG metrics. But – probably more importantly –there is just a lack of disclosure around all kinds of executive compensation issues in Asia.’
It’s not an issue specific to ESG. There are a number of reasons companies generally don’t talk about compensation, including a lack of regulation such as say-on-pay votes, and a lack of investor and media pressure. On the investor side, a lot of that is down to the fact that many companies have a majority-block shareholder or are family-owned. On the media side, Davis highlights the fact that ‘pay levels for senior executives in Asia are much lower than they are in the rest of the world, so we don’t have as many articles around, quote-unquote, excessive CEO pay.’
But he adds that, internally at least, attitudes around ESG and compensation are changing. Most of the boards and clients Willis Towers Watson works with on this in Asia ‘see ESG as necessary for ensuring the sustainability and long-term success of the company,’ explains Davis, citing how vocal big, global investors are on their views of ESG issues as essential to company success.
But he adds that, internally at least, attitudes around ESG and compensation are changing. Most of the boards and clients Willis Towers Watson works with on this in Asia ‘see ESG as necessary for ensuring the sustainability and long-term success of the company,’ explains Davis, citing how vocal big, global investors are on their views of ESG issues as essential to company success.
This is an extract of an article from the Spring 2021 issue of IR Magazine.
