SOE execs may face pay cuts in 2015

Reduction expected to lessen gap with staff salaries

Executives at 72 centrally administered State-owned enterprises (SOEs) may face a pay cut in 2015, the Xinhua News Agency reported on Saturday, as part of a broader reform of the country's sprawling SOE sector.

Salaries of executives at the 72 central SOEs that include China National Petroleum Corp and China Mobile will be reduced starting from the beginning of 2015, Xinhua reported, citing the Ministry of Human Resources and Social Security.

Some of the executives may see big pay cuts, said the report, according to which following the pay cuts, salaries of SOE executives will consist of three parts - basic salaries, performance-related salaries, and incentive income during their terms of office. The exact range of the pay cuts was not specified.

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 the National 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.

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.

There are also large salary gaps within SOEs between highly paid executives and their employees, the Xinhua report said, citing Wang Hongzhang, chairman of China Construction Bank, who earned 14.2 times higher than his employees in 2013.