Whopping expense irritates public
Rather than learning lessons from the failure of the US President Barack Obama’s announcement, aiming to end the America’s “Gilded Age”, of compensation caps on financial companies, some Chinese State-owned financial companies still go on with their risk of stirring the public with their thumping executive packages.
Guotai Jun’an Securities Co, one of the largest brokerages in China, is the very firm that the public attack most, as it’s reported that, for 2008 in which great losses hit the financial services and a drop of 24.24 percent in net profit fell on the company, it’s ready to grant big hope in the rise of wage to its executive.
As one of the largest firms in the country (about 3,200 employees) in both regular brokerage services and an investor in other companies, Guotai Jun’an was condemned by the Chinese media for its decision that 3.2 billion yuan ($470 million) would be spent on “compensation and welfare expenses” for the past year, 57 percent higher than its compensation budget at the beginning of the year. Take a move State broadcaster China Central Television for example, it remarked the decision as the one that “causing harmful social influence”.
It would be beyond anyone’s imagination if the compensation and welfare expenses are the only directions in which the total amount mentioned goes. That means the staff would get 1 million yuan each, tantamount 88 times an average urban worker’s annual income in 2007.
Forty-four brokerage and financial companies are exposed to have spent 20.9 billion yuan in compensation last year, some of which even spent 400,000 yuan on their staff on average. However, top executives in financial forms are usually paid much higher than the regular staff does. Among those executives, the pay as high as 66 million in 2007 for Ma Mingzhe, chairman of Ping An Insurance (Group) Co, aroused heat discussion and severe denouncement on the Internet.
A netizen-oriented survey has become a more powerful trigger of the public anger. The survey indicates that around 90 percent of the netizens criticize Guotai Jun’an’s action with such words as “outrageous” and “disgraceful”. And the company is so immoral and incredible that it is also compared to robbery in 2008 in which stock investors suffered an average of 200,000 yuan each.
“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. As far as we know the top two shareholders with more than half of stocks of the Guotai Jun’an in hand are working in Shanghai State-owned Assets Management Co and Central Huijin Investment Co. respectively, and both are state sectors.
The Ministry of Finance, in the coming Friday, would issue a new set of principles in the evaluation of performances of state-sectors financial institution and it would be added to the compensation plan. And it was on the Jan 13 that it also publicized an announcement that had certain restriction on the state-sector financial companies’ stock option incentives and employee stock ownership plans. In addition, advice was given that the enlarging income gaps should be taken into consideration before any appropriate action was to be taken.
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