The pay packets of Chinese CEOs doubled between 2005 and 2010, new research finds.
A study by Alex Bryson and John Forth of the National Institute of Economic Research and Minghai Zhou of the University of Nottingham Ningbo China found that the salaries of CEOs in China have been rising rapidly over the past decade.
By 2010, the average total cash and bonus compensation for a top Chinese executive was equivalent to $129,399. Although this is well below what Western executives earn, it still represents a 100% increase on what they would have earned five years earlier.
The research, which analyses accounting data on all the public companies listed on China's two stock exchanges for the period from 2001 to 2010, is published in the February 2014 issue of the Economic Journal.
It highlights that executive remuneration in China is increasingly linked to corporate performance in much the same way as it is in the West, even though the country remains a communist regime with state control of the largest firms. The strength of the pay-performance link is similar to that in Europe, but much less sensitive than in the United States.
As in the West, those executives who run the largest businesses in China are paid the most.
Between 2001 and 2010, China undertook a massive privatisation programme, which has affected remuneration trends. The percentage of publicly listed companies that were majority state-owned fell by almost half to 45%. In tandem, executive compensation rose markedly in privatised companies – by around 5% in those companies privatised between 2002 and 2010.
The research also found that, as in the West, CEOs are able to ‘skim’ company profits when corporate governance is poor. CEOs get a 10% premium if they start sitting on the compensation committee that determines their earnings. They get a similar premium if they become chairman of the board as well as CEO.
Commenting on the findings, Alex Bryson said: “Despite its very different political complexion, China’s incentive schemes for top executives increasingly mimic those in the West.
“For better or worse, some elements of executive compensation seem to transcend national economic, political and cultural differences.”
Sally Percy is editor of The Treasurer