Friday, March 27, 2009

Executive Rewards

" When reward is at it's pinnacle, risk is near at hand" - John Bolge

My eyes popped out after reading a report of S$20.5 million bonus to CapitalLand CEO, Liew Mun Leong. For that amount of money, we can get 10 Singapore Prime Minister, Lee Hsien Loong or more than 30 US President, Barack Obama for the job. They would have done a much better job at a substantially lower remuneration.

CapitalLand reported a 88.4 per cent fourth-quarter net profit plunge to S$78 million, due to revaluation losses on its investment property portfolio, a lack of write-backs for provisions and weak sales. I would give Mr Liew a F grade for that kind of performance. Are there no better person in this world for the job at a more decent remuneration?

In order for such huge bonuses, most CEO would have to take a much higher risk on behalf of the company and without doubt CapitalLand have purchased many properties at the peak in the last 2 years. Shareholders would have to bear the brunt of the CEO's and his senior executives mistakes for being too aggressive in their pursuit of profits.

CapitalLand recently completed a one-for two S$1.84 billion rights issue further squeezing blood out from shareholders who are already hard hit by the financial tsunami. Mr Liew said the group is bracing itself for a long, cold winter ahead, I would suggest he donate some of his bonuses to buy winter clothing for the shareholders.

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