Special Report:Global Financial Crisis
BEIJING, Feb. 7 -- While America's "Gilded Age" is
ending with U.S. President Barack Obama's announcement of compensation caps on
financial companies being bailed out by public funds, some Chinese State-owned
financial firms are still testing public tolerance with astronomical executive
packages.
The main target of a public outcry is Guotai Jun'an
Securities Co, one of the largest brokerages in China, which is reportedly ready
to give its executives hefty pay rises for 2008, when the financial services
industry suffered major losses and the company itself saw a 24.24 percent
decline in net profit, according to the Securities Association of China.
Guotai Jun'an announced it would earmark 3.2 billion
yuan ($470 million) for "compensation and welfare expenses" for the past year,
57 percent higher than its compensation budget at the beginning of the year.
The decision, pending approval from its board of
directors, was immediately chastised by the Chinese media as a move State
broadcaster China Central Television described as "causing harmful social
influence".
Guotai Jun'an employs a staff of 3,200 and is one of
the largest firms in the country in both regular brokerage services and an
investor in other companies.
If the earmarked amount is spent entirely as
compensation and welfare expenses, the company's employees would each receive 1
million yuan, or 88 times an average urban worker's annual income in 2007.
According to a survey by Shanghai Securities News, 44 brokerage and financial
companies spent roughly 20.9 billion yuan in compensation last year and some
firms paid their staff 400,000 yuan each on average.
However, it is common for top executives in financial
firms to earn in multiples of what regular staff are paid. The highest pay
package in the industry in 2007 was as much as 66 million yuan for Ma Mingzhe,
chairman of Ping An Insurance (Group) Co, which drew great ire on Internet
forums.
This time, amid even more widespread public anger, an
online survey conducted by Sina.com showed that about 90 percent of netizens
said Guotai Jun'an's move was "outrageous" and "disgraceful".
When stock investors incurred losses of 200,000 yuan
each on average in 2008, Guotai Jun'an's pay package is tantamount to robbery
and is immoral, commented the Chinese-language newspaper Legal Daily.
"The compensation policy in State-owned companies
should not be handled at will," said Professor Li Shuguang with China University
of Political Science and Law.
Among Guotai Jun'an's shareholders, the largest two
are in the State sector: Shanghai State-owned Assets Management Co and Central
Huijin Investment Co. They hold more than half of the company's stock.
On Friday, the Ministry of Finance announced it would
soon release new standards for evaluating performances of State-sector financial
institutions and link them to compensation schemes.
On Jan 13, the ministry issued a circular suspending
State-sector financial companies' stock option incentives and employee stock
ownership plans; and told them to act "reasonably" to avoid widening income
gaps.
(Source: China Daily)
Obama imposes $500,000 cap on
executive pay in bailouts
WASHINGTON, Feb. 4 (Chinese media) -- The Obama administration on
Wednesday imposed a pay cap of 500,000 U.S. dollars for top executives at
companies that receive the government bailout money to weather the current
financial crisis.
The new rule came out amid rising public fury about
huge pay packages for executives at financial companies being propped up by
federal tax dollars. Full story
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