Thai company directors among worst paid

A survey covering one-third of the country's listed companies has revealed that remuneration for Thai company directors is among the lowest in the world.

The "2008 Thai Directors Compensation Survey", recently undertaken by the Thai Institute of Directors (IOD), found that about half of the 174 companies responding to the survey paid their chairpersons less than Bt40,000 a month.

The lowest-paid chairperson received Bt7,500 a month - lower than the start-up salary for a university-graduate employee. On the other hand, the highest-paid chairpersons received Bt450,000 per month, and the best-paid directors, Bt250,000.

The average monthly compensation for chairpersons was Bt67,785.

Among the different industries, the chairpersons of commercial banks received the highest annual pay, averaging Bt2.27 million. Coming a distant second, the chairpersons of technology companies averaged Bt1.3 million per year, followed by those of securities and finance firms, averaging Bt835,033, and services, Bt830,648. The annual remuneration of non-executive chairpersons was double that of executive chairpersons.

The average monthly compensation for executive and non-executive directors was Bt29,654 and Bt31,651, respectively. The lowest-paid executive and non-executive directors received Bt6,600 and Bt7,500, respectively. In total, fees paid to non-executive directors were 15 per cent higher than those for executive directors, who also receive salaries as company executives.

The IOD's executive vice president for research and policy, Pornkanok Wipusanawan, said the results confirmed that Thai directors were among the lowest paid in the world.

"It's a pity [for directors of small companies, who get little pay]. By law, directors of small and large companies bear the same risks and liabilities. Hence, it's difficult to find competent and professional directors who dare to sit on the boards [of smaller companies]," she said.

The remuneration arrangements for directors in Thailand commonly involve retainer fees, attendance fees and bonuses, which are either fixed or linked to dividends or profit, and thus variable. The 2008 survey found retainer fees were the most popular method of compensation, used by 105 respondent companies, or 78 per cent of the total. Two years ago, this figure was 70 per cent of the total. Attendance fees were paid by 105 firms and 51 paid bonuses to their directors.

About 43 per cent of respondent companies paid either retainer or attendance fees, while the rest paid both retainer and attendance fees, or also paid bonuses.

The survey found that companies were appointing more board subcommittees, due to regulation requirements and other factors. Consequently, subcommittee fees have doubled their contribution to 25 per cent of total director remuneration, compared with only 12 per cent two years ago.

Seventy per cent of respondent companies said they had a salary and benefit subcommittee, 60 per cent had search committees, 39 per cent had management subcommittees, 18 per cent had good governance or risk-management subcommittees and 2 per cent had corporate governance subcommittees.

Among the industries, banks paid the highest annual sum to their boards of directors, averaging Bt27.6 million per board. They were followed by natural resources companies, which paid Bt12.2 million; insurance companies, Bt10.2 million; and securities and finance firms, Bt9.5 million. Pornkanok said securities and finance companies would have been ranked third, had it not been for the fact that a few insurance firms paid "significantly high" compensation to their directors. The boards of consumer products companies were the lowest paid, with an average of only Bt3.4 million per board.

Of all firms responding to the survey, the highest-paid board received Bt85.75 million last year while the lowest-paid got Bt220,000. More than half of respondent companies paid their boards less than Bt8 million. Levels of remuneration were related to the size of the companies: larger firms paid more than smaller companies.

With regard to attendance fees, chairpersons of respondent listed companies received an average Bt30,243 every time they took part in a board meeting, while executive and non-executive directors received payments averaging Bt17,457 and Bt21,813, respectively. The highest meeting fee was Bt220,000, paid by a firm for its chairperson to attend a board meeting, while Bt500 was the lowest attendance fee for executive directors.

Bonuses paid to chairpersons averaged Bt743,206, while executive and non-executive directors received Bt527,450 and Bt561,382, on average.

As well as retainer and attendance fees and bonuses, about half of the respondent companies said they provided director and officer liability insurance to their board members. Coverage varied from Bt2 billion to Bt15 million per board. Thirty per cent of firms also offered company cars.

Other perks and benefits included travel insurance (16 firms), life insurance (seven firms), health insurance or allowance (11 firms) and club membership fees (six firms). Two firms offered their directors credit cards with fixed credit limits.

Less than 1 per cent of respondent firms said they offered stock options to their directors.

The IOD's president and chief executive, Charnchai Charuvastr, said that an international trend was for directors' remuneration to be linked to their fiduciary oversight and not to incentives for taking risks, while salaries for executives were aligned closely with a company's performance and were designed for the taking of appropriate risks.

Moreover, while remuneration packages for executives should aim to retain talent, it is in the interests of shareholders to avoid long-term entrenchment of directors to ensure that boards retain a fresh perspective. Some companies have issued rules to limit the terms of their directors, he said.

"It's also clear that there shouldn't be perks and benefits for directors. All compensation must be transparent and able to be quantified and reported," Charnchai said.

Citing "The New Director Compensation Paradigm", a report by global human resources consultancy Mercer, Charnchai said other trends included a move away from meeting fees to a pure retainer-fee approach, and more offerings of full-value stocks instead of stock options.

Commenting on the survey results, other voices joined the call for Thai firms to consider offering both cash and stocks as remuneration to their directors - the latter aligning their performance with the interests of shareholders.

Boyden Associates (Thailand) chairman Chainarong Indhara-meesup pointed out that in the US, owning a firm's stocks has long been a prerequisite for a person to be recruited as a director. He said many state enterprises had used perks and benefits to neutralise and silence their directors, including paying for trips to Las Vegas.

However, Kim Eng Securities (Thailand) chairman Yuth Vorachattarn, who sits on the boards of many other companies, warned that giving out stocks to directors might, in the near future, become "less fashionable". This was because of the many negative aspects involved, including conflicts of interest, inside information and greed. These aspects might partly be attributed to the current global economic crisis, he said.

pichaya@nationgroup.com