Japan and other developed Asian markets lack of executive compensation disclosure could harm corporate value and put investors at risk, according to a report by the CFA Institute Centre for Financial Market Integrity.
While the likelihood of executive compensation abuses in Asia reaching levels of excess seen in the United States or Europe is slim, prevailing disclosure regulations and practices in Hong Kong, Singapore and Japan leave room for questionable pay arrangements to continue or escalate in the future, and potentially harm corporate value and investor confidence, said a statement about the report, It Pays to Disclose: Bridging the Information Gap in Executive Compensation Disclosures in Asia.
Understanding executive compensation structures is important because it gives investors an idea of the incentives that drive executives behaviors and business decisions, Lee Kha Loon, head of Asia Pacific at CFA Institute Centre in Hong Kong, said in the statement. Investors need to have the right information to analyze how companies executive pay packages are aligned with their long-term interests. The existing disclosure environment in Asia could be enhanced to give investors a fuller picture of the pay-for-performance discipline of listed companies.
As other global financial centers have tightened their discipline in terms of executive pay disclosure regulation and practices, the time has come for Asias developed markets to talk about the need for enhancements, James Allen, director of the CFA centers global capital markets group in Charlottesville, Va., said in the statement.