Source : Straits Times - 24 Apr 2009
IT HAS grabbed many headlines over recent weeks but the $20.52 million bonus paid to CapitaLand’s chief executive hardly raised a stir at the firm’s annual general meeting yesterday.
Only one investor questioned whether the amount paid to Mr Liew Mun Leong in 2007, but which was announced only recently, made any sense.
More attention was paid to other issues, including the property giant’s prospects in the coming years, and its dividend policy and financial health.
But Mr Lim Chin Beng, chairman of the executive resource and compensation committee, tackled the bonus question head-on.
He told the 360 shareholders that the bonus in 2007 was accrued, and was due to an economic value added payment or EVA. This measures the net operating profit after tax, minus the cost of all capital employed.
CapitaLand’s EVA in 2007 was $2.3 billion but fell to $660 million last year.
This was why Mr Liew was credited with a comparatively more modest bonus of $2.98 million for last year.
‘EVA has been proven to be a very effective way of determining how efficient a company is and it is for the long-term interest of the company that it uses EVA,’ said Mr Lim.
He added that Mr Liew’s bonus goes into an ‘EVA bank account’ and he takes home one-third of the balance every year.
In a bad year for CapitaLand, for instance, that running total in his bonus account may be clawed back.
‘In the early years of CapitaLand’s life, there have been very bad years. There have been negative EVAs,’ Mr Lim said.
He added that in calculating EVA, CapitaLand excluded revaluation gains. These typically would have boosted the earnings of most developers during the 2007 property boom.
Mr Liew told shareholders at the Capital Tower auditorium that one of the company’s main cornerstones today is ’solvency’.
That was a main reason it undertook a recent $1.84 billion rights issue to increase its war chest from $4.2 billion to $6 billion.
‘That’s why you’ve companies like AIG and General Motors - they’re all not solvent,’ he said.
‘What we’re doing is to make sure that…we can survive the crisis and we’ve enough at the same time to take advantage of new investment opportunities.’
Some shareholders told The Straits Times yesterday that Mr Liew’s bonus was not an issue for them.
‘He has managed the company well and he deserves it,’ said shareholder Don, who did not want to give his full name.
Mr Tan, another shareholder seated alongside him who also did not wish to give his full name, said he was confident that the board of directors would do the right thing.
GOOD PERFORMANCE GAUGE
‘EVA has been proven to be a very effective way of determining how efficient a company is and it is for the long-term interest of the company that it uses EVA.’
Mr Lim Chin Beng, chairman of the executive resource and compensation committee, on the economic value added payment (EVA) which measures the net operating profit after tax, minus the cost of all capital employed
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