While developed markets in the West have seen significant changes in executive compensation regulations and practices following cases of excessive pay in recent years, their counterparts in Asia have done little to show that they consider the remuneration of executives and directors to be a serious governance issue. Hong Kong, Singapore, and Japan are lagging in international best practice in executive-compensation disclosure and practices, due to a combination of factors: lack of regulatory push, inadequate information in financial reports, little use of long-term incentive plans, poor board oversight, and lack of investor influence on companies' executive compensation. While the investment community in the region generally is of the opinion that pay abuses in Asia are unlikely to reach the scale seen in the West, the CFA Institute Centre for Financial Market Integrity argues that the current regime leaves room for questionable pay arrangements to continue or escalate in the future. This paper argues that a combination of regulatory enhancements, voluntary disclosure among companies, and greater vigilance among investors will raise the level of executive compensation discipline in the region.

This report is updated to correct an error in the previous version. On Page 2, the managers, not the CEO, of the Singaporean real estate investment trust benefited from the IPO price appreciation of the trust. Details of the incident are correctly stated on Page 15.