Non-exec director’s average yearly remuneration is RM162,000

PETALING JAYA: 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, according to a report by KPMG in Malaysia.

This represents an increase of 33% from the 2013 results of RM122,000 per annum, which itself is a 37% increase over the first report published in 2009 (RM89,000 per annum).

With the third iteration of the report now across an eight-year horizon, it is noted that NED remuneration has increased at a compounded annual growth rate of 8% per annum over this period.

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%).

Datuk Johan Idris, managing partner of KPMG in Malaysia, noted a number of factors influencing the steady rise in NED remuneration, including rising expectations, responsibilities and commitment as well as intensifying demands of globalisation, emergence of novel technologies and the relentless pressure on companies to innovate.

In light of the shrinking pool of NEDs with specialised skills, Johan opined that the possession of niche skill sets commonly result in NEDs commanding a premium in terms of their remuneration package.

KPMG’s head of risk consulting in Malaysia Mohd Khaidzir Shahari said a notable fact that jumped out from this study was 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%).

In recognising the benefits of greater transparency, Bursa Malaysia Securities Bhd has now mandated the disclosure of directors’ remuneration on a named basis and by the exact amount for the listed issuer level and group level. The report indicated that prior to the introduction of the amended Listing Requirements, only 21% of the listed issuers assessed have voluntarily disclosed directors’ remuneration on a named basis and by the exact amount in the annual report.