State-owned company executive pay restrictions recently introduced
With the introduction of "restricted wage" policies for senior executives in financial institutions, it has become increasingly logical to advocate for high-level pay structures in state-owned enterprises (SOEs). Recently, it was reported that the regulations governing the remuneration of SOE leaders, drafted by the Ministry of Human Resources and Social Security, are nearing finalization. These rules are currently undergoing further revisions and improvements before being submitted to the State Council for approval. Once finalized, they are expected to be officially released soon. The "Restricted Wages Order" issued by top financial institutions under the Ministry of Finance is considered a key component of these broader administrative measures.
The issue of executive compensation in SOEs involves complex considerations, as it requires balancing interests across different regions, industries, and sectors. Ensuring that the regulations are practical and enforceable remains a major concern among policymakers and stakeholders alike.
For years, the high salaries of executives in certain SOEs—especially those in monopolistic sectors—have drawn significant public criticism. The economic downturn triggered by the global financial crisis led to widespread job cuts and layoffs. In this context, the high pay of some SOE executives has appeared particularly glaring, fueling growing calls for stricter pay controls on senior management.
**CNOOC Chairman’s 10 Million Yuan Annual Salary Sparks Debate**
According to CNOOC’s 2008 annual report, the company saw a 40% increase in performance and a 42% rise in net profit, reaching a record high of 44.3 billion yuan. However, what captured public attention was the disclosure of the chairman and CEO Fu Chengyu’s salary, which amounted to 12.04 million yuan—up by 740,000 yuan from 2007. This figure included five components: board bonuses, salary allowances, performance incentives, retirement contributions, and stock options.
In comparison, the annual salaries of executives at PetroChina and Sinopec were significantly lower. For instance, PetroChina’s vice chairman and president Zhou Jiping earned 51.5 million yuan, while Sinopec’s president Wang Tianpu received only 844,000 yuan. The stark contrast sparked public skepticism, especially after the Ministry of Finance had recently announced restrictions on financial institution executives' pay.
In response to public scrutiny, CNOOC officials stated that the company, as a Hong Kong-listed entity, set executive compensation according to Hong Kong’s regulatory framework. They emphasized that the salary was not a "nominal" amount but aligned with local standards. Meanwhile, the State-owned Assets Supervision and Administration Commission (SASAC) clarified that Fu Chengyu’s pay was determined based on his performance, noting that central SOE executives do not typically earn over 10 million yuan annually.
**Broader Concerns Over Executive Pay Restrictions**
On April 10, the Ministry of Finance issued a circular limiting the pay of top executives in state-owned financial institutions, capping their 2008 salaries at no more than 90% of the previous year’s level. This move is part of a larger initiative to draft comprehensive administrative measures on executive compensation in SOEs.
Experts believe that the focus on financial sector pay reflects broader concerns about excessive executive pay across all sectors. Professor Yang Ruilong from Renmin University argued that not only financial executives but also those in monopolistic SOEs and listed private companies should have their pay controlled if it diverges from company performance.
Professor Zhang Li from the Central University of Finance and Economics highlighted three critical challenges in implementing the new measures: defining what constitutes an SOE, ensuring legal consistency, and preventing unintended consequences such as a “salary hike†trend. He noted that some companies might attempt to restructure pay to bypass restrictions, as seen in cases like Shanghai Pudong Development Bank, where mid-level employees received significantly higher compensation than senior executives.
As the government moves forward with these reforms, the goal is to create a fairer, more transparent system that aligns executive pay with performance and public interest. While the road ahead is complex, the push for greater accountability in executive compensation continues to gain momentum.
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