World Monitor Magazine April 2017 - Page 60

EXPERT OPINION How much should you pay top management and Board of Directors members in Kazakhstan? EY has answered this and other questions in a unique research report. Oktyabrina Murzagaliyeva, Manager, People Advisory Services, EY The remuneration of top management and Board members is a special case in the remuneration system as a whole. Their pay differs from other types not only by its high levels of compensation and benefits, but also by the inclusion of Long-term Incentive Plans (LTIPs). LTIP sare common international market practice in major companies, which aim to increase their market cap and investment attractiveness. The key objectives of LTIPs are to align shareholders’ and executives’ interests, to motivate executives to work towards long- term and sustainable company growth, and to increase management’s trust by giving them the opportunity to share in the company’s success. Top management In Kazakhstan, 2% of companies reviewed in the report have an LTIP for top management.For comparison, this share is 90% 1 in companies in the FTSE 350 index. Possible reasons may be the lack of development of remuneration practices in our country, as well as tax regulations and legislation for implementing different LTIP structures. In March 2017, EY issued a report containing survey results on top management and Board members’ remuneration in Kazakhstan companies for the 2015/2016 financial year. Information on top management and Board members’ remuneration was collected during a number of EY projects on both general and sector-specific remuneration reports, as well as Kazakhstan employment surveys. The report presents data on 85 companies that provided comprehensive information. Board members Analysis of payment for Board members, including committee chairs and members, shows that payments to the audit committee are higher than those to other committees. In addition, we observed that there is a direct correlation between a company’s assets and Board members’ remuneration, i.e. the higher the company assets, the higher the basic pay of the Chairman of the Board of Directors and its members. Our report includes companies from the following sectors: agriculture, mining and metals, oil and gas, consumer goods, construction, telecommunication, transport and logistics, financial institutions and banks, pharmaceutical, energy, and others. The issue of top management and Board members’ remuneration is a key focus of governments, investors and the mass media across the globe. The following issues are frequently discussed: simplification of the top management remuneration system, limitations to excessive payments, more transparency, and aligning executives with the long-term business strategy of the company. The main elements of top managers’ and Board members’ remuneration are presented in the following graphs. 56 world monitor The survey results also revealed that, on average, the annual remuneration package (including all remuneration elements accruing for the year) of General Directors in joint ventures is 2.5 times higher than that of General Directors in local companies.