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Legal Forums » Compensation » Does China Have an Executive-Compensation Problem?
Started Nov 15 2012, 19:13
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Nov 15 2012, 19:13
Since China opened up to the world with its sweeping economic reforms in the late 1970s, and especially in the past decade as private-sector enterprises have mushroomed, the model of executive compensation in the country has increasingly mirrored ones in the U.S. and Europe.
How is it, then, that Chinese executives are paid only a fraction of the compensation earned by their American counterparts in companies of equal size in the same industries? Or are they?
In China, executive compensation above tens of millions of yuan (1 yuan equals 16¢) would be seen as astronomical and would cause an uproar. In 2007, the latest year studied, China Stone Management Consulting Group used compensation disclosures in companies’ annual reports to analyze data on executive compensation at China’s 200 largest public companies by market capitalization. They found that 64.8% of executives received compensation ranging from 100,000 to 500,000 yuan (about $16,000 to $80,000) and 19.5% between 500,000 and 1 million yuan ($80,000 and $160,000).
A public outcry occurred in 2008 when it was disclosed that the annual salary of Ma Mingzhe, chairman and CEO of Ping An Insurance Group, an insurance and financial-services company, was 66 million yuan ($10.5 million). Yet his salary was nowhere near that of UnitedHealth Group CEO Stephen J. Hemsley, who was listed at the top of Forbes magazine’s 2011 list of highest-paid American executives, with annual income of $102 million, including gains from exercising stock options.
Compensation
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