Little merit seen in executive pay

PUBLISHED : Monday, 02 September, 1996, 12:00am
UPDATED : Monday, 02 September, 1996, 12:00am

The pay of top executives in Hong Kong could be too high and is not linked to corporate performance, a study by City University of Hong Kong shows.

The remuneration packages of more than 1,500 companies were looked at between 1990 and 1994.

The researchers found it was not uncommon for executives in Hong Kong to get paid on a par with the top executives of some of the United States largest companies.

'In some extreme cases, total executive pay may even exceed the current year net profits of the entire firm,' researchers Bob Chan, Joey Chan and Stephen Leung said.

A reason for the big pay cheques in Hong Kong was because, in general, Hong Kong top executives owned more of the listed company concerned than their North American counterparts.

'The median ownership percentage is 47.3 per cent, which again suggests that firm directors typically own a controlling stake in the companies they manage,' they said.

The median of the directors' fees was $100,000 while the median of emoluments was $4.5 million, the study found.

The incidence of directors in Hong Kong paying themselves more than the actual profit at the group was not that uncommon, the researchers said.

'There is a total of 132 cases in our sample. In one extreme case, total director compensations were 76 times the net profits,' the researchers said.

The researchers looked at the relationship between director compensations and company performance.

'Our analysis shows that firm performance does not have influence on director compensation,' they said.