Worldwide corporate executives might earn more than ever before, China is cutting their salaries to reduce the gap between poor and rich. China´s state owned companies (SOE´s) are setting an example, says Zhang Juwei, a research fellow at the Chinese Academy of Social Sciences (CASS), at the Global Times.
The executives’ payroll will also be capped at seven to eight times the average pay of SOE employees, a decrease from the current rate of about 12 times.
With the new pay regime that adds incentive income to SOE executives’ salary evaluation, the executives are likely to become more involved in longer-term growth of their enterprises, Zhang Juwei, a research fellow at the Chinese Academy of Social Sciences, told the Global Times on Sunday.
Pay cuts for executives at the 72 central SOEs will also be used as a reference for regulation of bosses at other SOEs, Zhang believes, urging stricter oversight of the executives’ performance to keep them motivated.
The 72 central SOEs are the first batch of State firms to face executive pay cuts, with more batches of SOEs set to face similar pay cuts in the future though the dates are still unknown.
Because executives at the 72 central SOEs are appointed by the central government, their salaries should be different from chiefs selected by companies, Liu Quanhong, a research fellow at the Academy of Macroeconomic Research under theNational Development and Reform Commission, told the Global Times on Sunday.
The 72 central SOEs are mostly in fields such as finance, energy and telecommunications where the State companies are seen as having a monopoly, Zhang said, noting it is reasonable to cut salaries of executives at these SOEs in order to avoid an excessive income gap.