China plans cap on SOE execs's payroll

By Hou Lei (chinadaily.com.cn)
Updated: 2009-02-20 09:47

China is mulling a cap on the pay package of senior executives at State-owned enterprises (SOE) after a colossal compensation arrangement at a stock brokerage caused an uproar at a time of economic downturn.

The SOEs shall pay their senior executives no more than 10-12 times average staff salaries, reported the China Economic Net, citing a draft plan being drafted by the Ministry of Human Resources and Social Security.

The plan also set a limit on the growth of executive pay, to no faster than the expansion rate of corporate profits.

"It will serve as a general guideline on SOE executive salaries," the report said, adding that detailed rules will be worked out for the financial, tobacco and post industries.

Financial sector will be the first to be regulated, given the current economic situation and the often hefty income enjoyed by head of these firms, the report cited a source familiar with the situation as saying.

Executive pays came under the spotlight after Guotai Jun'an, one of China's leading brokerages, last month revealed a package of 3.2 billion yuan ($470 million) for "compensation and welfare” in 2008, while average Chinese stock investors suffered steep losses.

Earlier this month, the Ministry of Finance has reportedly drafted a circular limiting the annual salary of top executives in the State-owned financial companies within 2.8 million yuan.

The ceiling was regarded too high by many in a country where the average annual income in urban SOEs was just 20,576 yuan (US$3008) in the first three quarters of 2008.

However, others argue that it is reasonable for senior executives to enjoy a high salary, as their talent and expertise are vital for the development of the enterprises they serve.

The human resource ministry plan is expected to be submitted to the State Council, China's Cabinet, for approval before the National People's Congress opens its annual session in early March.