Wide Earnings Gap Exists Among Listed Chinese Firms' Execs, Report Says
Liao Shumin
DATE:  Dec 26 2017
/ SOURCE:  Yicai
Wide Earnings Gap Exists Among Listed Chinese Firms' Execs, Report Says Wide Earnings Gap Exists Among Listed Chinese Firms' Execs, Report Says

(Yicai Global) Dec. 26 -- The top three executives' compensation at 13 of China's 2,829 listed companies was above CNY100 million (USD15.2 million) last year, while execs at 25 listed companies raked in less than CNY100,000 on average.

Leshi Internet Information and Technology Corp. [SHA:300104], Midea Group Co. [SHE:000333] and Wangsu Science and Technology Co. [SHE:300017] were among those that shelled out big bucks on the higherups, per the Report on Executive Compensation Index of China's Listed Companies (2017) that Beijing Normal University's Research Center for Corporate Governance and Enterprise Development recently published.

Suzhou New District Hi-Tech Industrial Co. [SHA:600736], China United Network Communications Ltd. [SHA:600050] and YanTai Yuancheng Gold Co. [SHA:600766] were more frugal.

Unlike previous reports of its kind, this one calculated executive compensation by converting a variety of income sources -- including basic pay, bonuses, benefits, subsidies, allowances and stock options -- into one number. The report only covered the compensation of general manager, deputy general managers, executive directors and board secretaries. It did not include the compensation of party secretaries, union chairmen or supervisors.

This method is flawed as exercisable stocks can drive up an executive's compensation in a given year, Prof. Gao Minghua, the report's promulgator and director of the Research Center for Corporate Governance and Enterprise Development, told China Economic Weekly.

The report introduced the concept of the executive compensation index by calculating the ratio of the average compensation of the top three executives to the operating income of a listed company in 2016.

The executive compensation index reflects the goodness of fit between executive compensation and their contribution, said Gao. A mid-range value shows a match between incentives and performance.

"We determined the index interval of excessive incentive, moderate incentive and insufficient incentive based on quartiles," he said. "707 of 2,829 listed companies conducted an excessive incentive mechanism, 1,415 conducted moderately and 707 conducted insufficiently."

Winning Health Technology Group Co. [SHE:300253] had the most excessive incentive mechanisms with an index of 33,265.41, while China United Network Communications had the most insufficient mechanisms with a score of 0.05.

Six special treatment companies were among the groups with the 100 most excessive incentive mechanisms, 85 of which were state-owned. Groups in the top 100 represented 8.11 percent, 8.3 percent and 0.83 percent of listed special treatment, state-owned and non-state-owned companies.

The average value of the executive compensation index in 2012 was 130.49, 312.74 in 2015 and 359.66 last year. The index's 28.85 percent growth rate outpaced that of company performance, Gao said.

The ten companies whose top three execs received the highest compensation were non-state-owned. The higherups at four of them, including Leshi and Midea Group, got more than CNY200 million on average.

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Keywords:   MSCI,Senior Executive,PAYMENT