BEIJING -- China's government disclosed
that it had set limits on executive pay for 2008 at state-owned financial
companies, the latest effort to address public concern over pay at
companies controlled by the country's nominally socialist government.
Total compensation for last year was capped
at 90% of the amount executives received in 2007, the Ministry of Finance
said in a brief statement. For companies whose revenue fell last year, the
limit was set at 80%, it said. The statement, issued late Thursday, said
the new rule had been issued "recently," but didn't elaborate. A ministry
spokesman declined to comment Friday.
Executive pay has become a hot-button issue
in the U.S. and other countries amid the global financial crisis. In
China, salary levels have risen in recent years with rising profits, but
executives in the financial sector generally earn a fraction of what their
counterparts at western companies make – even though China's banks are
among the largest in the world and have largely avoided the losses that
crippled many foreign counterparts. Low compensation levels have been
blamed, in part, for several prominent corruption scandals at Chinese
government enterprises in recent years.
Still, compensation in the financial sector
has been a contentious subject in China, where almost all major banks and
insurers are majority owned by the government, and most top executives are
appointed by the ruling Communist Party. The issue has become more
sensitive since last year as plunging exports and property prices have led
to large losses of factory and construction jobs, exacerbating a wealth
gap that had already widened sharply in recent years.
"In recent years, with the continued
deepening of reform in China's financial sector … compensation levels in
the industry have increased rapidly," which has "clearly widened the gap
with average levels in society and among other employees," the finance
ministry said in its statement. The ministry's pay caps were designed
mainly to "help the fair distribution of income in society" and "protect
the interests of the country and of shareholders," it said.
The ministry's directive appears to be
reflected in the compensation packages already disclosed by some of
China's biggest financial institutions. Industrial & Commercial Bank of
China Ltd., the country's largest lender by assets and the biggest in the
world by market value, reported last month that Chairman Jiang Jianqing
received 1.61 million yuan, or about $235,000, in total compensation last
year, down 10.3% from 2007. Industrial & Commercial Bank's net profit last
year jumped 36% to 110.84 billion yuan. In 2007, Mr. Jiang's total
compensation rose 38%.
Concern over executive compensation isn't
limited to the state sector, and not all China's financial firms have
fared so well. Last month, Ping An Insurance (Group) Co. of China Ltd. –
one of the few major financial companies in China that isn't majority
owned by the central government – said Chairman Ma Mingzhe had decided to
forgo his salary for 2008 entirely. In 2007, Mr. Ma received 66 million
yuan, or about $9.6 million, in compensation, a level that prompted
criticism from some Chinese commentators. Ping An this week reported a 99%
plunge in net profit for last year, thanks to an impairment charge of
about $3.33 billion on its stake in Dutch-Belgian financial firm Fortis NV
and to losses on investments.
Write to Jason Dean at