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.
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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.