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No Salary Increase for Chinese SOE Executives Until 2009

08-11 17:23 Caijing Magazine

SASAC reveals how much executives of state-owned enterprises earn for the first time.

By staff reporter Zhang Yuzhe

For the first time in five years, Beijing revealed how much the Chinese State-owned Enterprises heads have earned. Li Rongrong, director of State-owned Assets Supervision and Administration (SASAC), a government arm to the State Council in supervising state assets, said August 10 that SASAC has set up a basic salary framework to govern SOEs. Li disclosed that annually, 1500 senior executives have earned an increase of 45 million yuan in total.

According to Li, before SASAC, state enterprises decided their own salary framework, in his words, “to starve those who have no guts, and to glut those who have guts.” For example, in 2002, the largest Chinese petrochemical company, Sinopec, paid its major executives an annual salary of merely 90 thousand yuan per person. In contrast, the chairman of drug company, Sanjiu Corp., earned a big pay check topping 1.15 million yuan.

According to the SASAC salary framework, senior management is paid based on their performance. Two review periods are in place. The first period is from 2004 to 2006 and the second is from 2007 to 2009. For the first three consecutive years, the annual income by average is 350 thousand yuan, 430 thousand yuan, and 478 thousand yuan pretax. This indicates an average annual growth of 14.9 percent, by contrast, the SOE annual profit grew by 36.7 percent, and average employee income grew at 15.3 percent.

“This means that SASAC increased about 46 million yuan expense for management salary, in exchange for an annual profit growth of 150 billion yuan,” said Li.

According to Li, senior executives will have their salary relatively unchanged from 2007 to 2009. He also said that SASAC is not in the right position to regulate public companies in terms of how much their management earn.

Meanwhile, SASAC is working on regulating work related expense and extracurricular income.

Li publicly said that there will not be a large amount of tradable state-owned shares in the near future. As part of the share segmentation reform, state-owned non-tradable shares will be released to the market after certain lock-up periods. (← I don’t know what the writer is trying to say here) “For the sake of maintaining state-owned stakes, for quite a long time, state-owned shares will not be sold in a large amount on whole-sale markets.”

Chinese SOEs have reduced from 196 in 2002 to 149 as of today, and according to the State Council, state-owned companies will be further reduced to as few as 80 to 100 by 2010. Li reaffirmed this objective and emphasized that SASAC will expedite the pace of transforming SOEs into purely market-driven corporations.

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