Guotai Jun'an Securities, a brokerage with the government holding a majority stake, bowed to public pressure on Monday by disclosing its executives' pay details in attempts to prove they were not overpaid.
The pay for a director on the board was 830,000 yuan (about 121,522 U.S. dollars) last year while executives above assistant president level received 570,000 yuan per person on average.
The 2008 bonus for executives is yet to be decided by the board of directors. According to the company's statement, of the 2.08 billion yuan budgeted for salaries and bonus last year, about 800 million had already been paid in salaries to its 3,200-strong employees. That could mean bonuses of as much as 1.2 billion yuan in total.
The executive pay did not come anywhere close to that earned by their Wall Street counterparts. But in a country where urban residents had only 15,000 yuan at disposal per person on average a year and farmers earned even less, Guotai Jun'an has emerged as a symbol of "hefty salaries".
The company's name has hit the headlines of many local newspapers and became one of the hottest topics on Internet forums in the past week. Guangdong Daily carried a front page story saying that the practice of granting brokerage executives hefty salaries amid an economic downturn had "ignited public grumbles and shocked the market".
Secretary-general Sun Qunyi of the Remuneration Commission of the China Association for Labor Studies thought the incident had to some extent reflected the public's inclination to scrutinize state-controlled enterprises first when the economy was in difficult period.
A number of state-owned manufacturers including the Aluminum Corporation of China, Wuhan Steel and Iron Corp. and China Eastern have announced their plans since last November to slash executive pay by 15 to 20 percent as a gesture to boost corporate morale amid the financial crisis.
Heavy machinery manufacturer Sanyi Group announced on Thursday that its chairman had volunteered to cut its annual salary to 1 yuan (15 US cents) this year while some board members voluntarily have their pay slashed by as much as 90 percent this year. The chairman was paid 630,000 yuan in 2007.
"It is unnecessary to give executives of state-owned manufacturers too much credit for voluntary pay cuts since the authority has put in place a regulation to link executive bonus to corporate performance," said Sun Qunyi. "The anger with executive pays of state-controlled financial institutions stems mainly from the lack of a similar formulation."
Unlike manufacturing industry where the State-owned Assets Supervision and Administration Commission has established the criteria to gauge executive salaries of SOEs on behalf of the government, the executive payroll in state-controlled financial institutions was up to the board of directors.
"People don't mind how much an executive of a private financial institution earns. For those in state-owned financial companies, salary and bonus should be based upon executive performance and be capped," said Sun.
Last year, the Chinese economy ended its double-digit growth it had enjoyed for five consecutive years to grow 9 percent, while the capitalization of stock markets shrunk by more than 50 percent, inflicting losses to a raft of individual investors.
Researcher Yi Xianrong with the Chinese Academy of Social Sciences noted that when the economy was bleak, public sentiment tended to be more sensitive to wealth disparity as the country had a tradition of sharing woes during tough times.
According to a survey by Shanghai Securities News, 44 Chinese brokerage and financial companies have spent roughly 20.9 billion yuan in salaries last year, and some firms paid their staff 400,000 yuan each on average.
Yuan Gangming, a researcher with the Center for China in the World Economy at Tsinghua University, said that apart from squeezing the executive payroll of state-owned enterprises, the government should also optimize the taxation system to narrow the wealth gap and secure necessary incentives for corporate executives.
(Xinhua News Agency February 9, 2009)
