Against the global trend, China is capping the salaries of the leaders of its major state-owned companies. A good idea, says Zhang Juwei of the Chinnese Academy of Social Sciences (CASS) in the Global Times, and in the long run beneficial for the quality of those firms.
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…
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.
According to a report released by Chinese website operator NetEase on November 5, the average annual salaries of employees with the listed arms of central SOEs was 3.7 times higher than the salaries of urban private firm employees in 2013.
Are you interested in more stories by Zhang Juwei? Check out this recent list.