Which companies generated the most value out of their CEOs in 2022?

One way to measure this is by looking at a company’s Net Profits After Tax.

Yangzijiang Shipbuilding (YZJ), Singapore Telecommunications (SingTel) and Singapore Airlines (SIA) “generated the most value” out of their Chief Executive Officers (CEOs) based on the respective net profits after tax of their companies, according to a report by UOB Kay Hian.

 UOB Kay Hian measured this by comparing the compensation of CEOs versus their respective return on equity (ROE) and share price performance for that year. 

Another way they looked at whether a CEO was properly compensated is by looking at the company’s 2022 Net Profits After Tax (NPAT) as a multiple of the CEO’s compensation. 

When looking at measuring CEO pay vs ROE, UOB Kay Hian noted that large-cap companies “that notably recorded ROEs of >15% in 2022” like SGX, Starhub, ST Engineering, SIA and YZJ “appear to have paid their CEOs fairly.”

“For small/mid-caps, the two standout companies in this respect were RH Petrogas (2022 ROE: 53%) and PropNex (48%),” UOB said.

When looking at “CEO pay vs share price performance,” UOB Kay Hian said pay for the CEOs at Seatrium, Sembcorp Industries (SCI) and Keppel (KEP) was well-justified. 

“For the small/mid-caps, Marco Polo Marine was the standout with a share price gain of 52% in 2022 vs its CEO’s pay of $750,000,” UOB Kay Hian said.

Lowest paid CEO?

Data from UOB Kay Hian showed that YZJ’s CEO was the lowest paid on an absolute basis and significantly lower than the average CEO pay of $3.6m, amongst companies that they monitor.

“Its 2022 NPAT was over 7000x higher than its CEO’s pay,” UOB Kay Hian said.

“We also highlight that YZJ’s top three management, excluding the CEO, was paid less than S$0.4m in total, while the total compensation of its board of directors was less than $0.3m,” said UOB Kay Hin.

The expert, however, underscored that  YZJ’s CEO received $8.3m in dividends from the company in 2022. 

Meanwhile, the most overpaid CEOs, relative to their companies’ 2022 share price performance, were from UMS and Rex, with pay of $7.4m and $4.1m, respectively.

UOB Kay Hian said fair pay can be achieved by benchmarking “CEO pay to industry peers and similar-sized companies and putting in place performance-based incentives like “financial metrics such as revenue growth, profitability, and stock price, or non-financial measures like market share, customer satisfaction, and employee engagement.”