Since 2020, the COVID-19 outbreak led many countries, including Thailand, to impose lockdown and consequently brought about global recession. Businesses of all sizes and types were adversely affected by the pandemic and many have even gone bust. Surviving ones must prepare robust financial plans and implement prudent cost control measures. Companies have to lay off a number of employees and conduct organization-wide remuneration restructuring that affect compensation of staffs, management, and also directors in certain cases. Subject to the Board consideration, director compensation have been raised, cut, or held steady. 

      To determine director compensation, the Board must consider various key factors including performance of the company, roles and responsibilities, utilization of knowledge and experience of directors to maximize benefits of the company and shareholders, remuneration comparison among industry peers, economic conditions etc. Each company may set different weighting for such factors. The outcome of IOD’s bi-annual Director Compensation survey and international studies showed interesting findings as follow:

1.     Pearl Meyer’s study on “How Coronavirus is Affecting Director Compensation” in 2020:  Of 315 companies surveyed (73% listed companies, 23% private companies, and 4% not-for-profit companies), 55% either kept director compensation unchanged or raised from the previous year.

2.     IOD’s Director Compensation Survey 2020: By comparing Director Compensation (in nominal term) in 2020 Vs 2019 of 290 Thai listed companies surveyed, 88% kept compensation unchanged while 12% either raised or cut compensation from the previous year in various forms as shown in the table below:

Overall, most companies in the Thai capital market recognized the significance of director compensation to reward for their continuous performances as well as escalating roles and responsibilities in accordance with Fiduciary Duty principles under the Guideline on Division of Responsibilities between Board and Management.

As COVID-19 persists and has no clear ending timeframe, it remains a key challenge for directors to adjust strategies and cope with the crisis and rapidly changing environment.  It became a greater burden and more difficult tasks than in normal situation for directors to ensure business viability and promote sustainable governance in accordance to with the Guideline on Board’s Role in Strategy for Business Sustainability.

Practically, the Board may also consider other forms of compensation (other than nominal) such as travel expense, medical expense, life insurance, rights to buy the company’s goods and services etc. at the time when financial flexibility is limited and fairly disclose such information minutes shareholders’ meeting in accordance with the Compensation Committee Best Practice Guideline.

Regardless of the circumstances, directors (particularly Compensation Committee) should take into account relevant factors affecting director compensation to properly propose director compensation (both nominal and other forms) to shareholders’ meeting for approval.  This is essential in motivating and retaining competence directors within the company and perform effectively in the long run.  Meanwhile, Director Compensation must also be disclosed transparently in all forms of shareholders’ meeting and other relevant company reports.

Siriporn Wongkeaw
Senior CG Analyst – Research and Development
Thai Institute of Directors Association (IOD)