According to a report by KPMG in Malaysia, the average remuneration for each non-executive director (NED) is RM162,000 per annum for the top 300 largest listed issuers on Bursa Malaysia, by market capitalisation. This represents an increase of 33% from the 2013 results of RM122,000 per annum.
With this, it has been noted that NED remuneration increased at a compounded annual growth rate of 8% per annum over the period of eight years since the first iteration of the report.
The report titled KPMG Report on Non-Executive Directors’ Remuneration 2017 revealed that government-linked companies (GLCs) and companies in the financial sector lead the way on NEDs’ remuneration. The report suggested that the remuneration pay-out in GLCs and companies in the financial sector are ahead of the curve on grounds of their highly regulated operating environment and the public interest imperative inherent in them.
It also shows that fees remain the preferred form of remuneration (78%) followed by allowances (19%) and benefits-in-kind (3%). In light of this, Datuk Johan Idris, Managing Partner of KPMG in Malaysia noted a number of factors influencing the steady rise in NED remuneration.
“The rising expectations, responsibilities and commitment assumed by a NED have increased their remuneration and these are further accelerated against the intensifying demands of globalisation, emergence of novel technologies and the relentless pressure on companies to innovate,” he said.
Meanwhile, Khaidzir Shahari, KPMG’s Head of Risk Consulting in Malaysia noted that the number of NEDs occupying membership in two or more board committees of any one single listed issuer has increased in 2017 (64%) compared to 2013 (55%).
Hence, the directors and senior management’s remuneration policies and procedures disclosed on a company’s website pursuant to the Malaysian Code on Corporate Governance (MCCG) should be meaningful. This is to allow stakeholders to make an appreciable link between the remuneration framework and the objectives of the company.