From now on, the basic annual salary of top executives of central government enterprises must be linked to the average salary of ordinary staff and workers. This may help curb the “sky-high” salary of the top executives of state-owned monopolies.
With the approval of the State Council, the Ministry of Human Resources and Social Security (MOHRSS) recently released the Guiding Opinions on Further Regulating the Management of Salary for Responsible Persons of Central Government Enterprises in conjunction with the Organisation Department of the CPC Central Committee, Ministry of Supervision, Ministry of Finance, National Audit Office, State-Owned Assets Supervision and Administration Commission and other units to help establish and perfect the mechanism of incentives and constraints in the distribution of income for the top executives of these enterprises.
The document mainly seeks to further regulate salary management for top executives of central government enterprises by spelling out the basic salary management principles and their applicability, with specific guidelines on the structure and level of remuneration, methods of payment, supplementary insurance, work-related expenses, supervision and management, and the organisation of implementation.
The document lays down five basic principles for regulating the salary of these top executives: (1) Combining market regulation with government supervision. (2) Integrating incentives with constraints. (3) Taking both long-term and short-term incentives into consideration. (4) Achieving harmony between pay increases for top executives and for staff and workers. (5) Supplementing the perfection of the remuneration system with supporting measures for the regulation of supplementary insurance and work-related expenses.
The document makes it clear that the salary of top executives of central government enterprises mainly comprises three parts, namely, basic annual salary, performance-based annual salary and gains from medium- and long-term incentives.
However, MOHRSS stressed that since China is still in the experimental stage of reforming medium- and long-term incentives, including equity incentives, the Guiding Opinions set out in-principle provisions which allow for prudent explorations on medium- and long-term incentives, with special emphasis on basic annual salary and performance-based annual salary.
On how to regulate basic annual salary and performance-based annual salary, the document puts forward the concept of linking the two, that is, taking into consideration the need to motivate top executives of central government enterprises as well as the need to control the income gap between the top executives and the staff and workers.
Since MOHRSS has only issued a news release on this, full text of the document remains to be seen. Three questions are worthy of attention: first, whether there will be special arrangements for salary monitoring in central government financial enterprises; second, how to ensure implementation; and third, how the salary of the top executives should be linked to that of the salary of staff and workers.
