We did not promise Link a monopoly on supply of shopping centres, insists Hong Kong Chief Executive Leung Chun-ying
In the second of a two-part interview, Leung Chun-ying talks about the Link Reit, mainland-Hong Kong relations and the support he receives from his family
On the Link Reit
Q: Are you confident about dealing with the Link Reit in the rest of your term?
A: The Link affects the shopping needs and hits the pockets of a lot of people in Hong Kong and the part of the population that can least afford to pay high prices for shopping. The conduct of the Link generally: firstly, a “reit” has to behave like a reit – a real estate investment trust. They are not a developer. Second point: the Link has a particular corporate social responsibility, because they serve the needs of public rental housing tenants. Many public rental housing tenants in Hong Kong can least afford to pay high prices. And I should also add that I’m particularly curious about the way that senior management of Link Reit is incentivised. I’m curious about whether the top management of Link is incentivised in such a way that they seek rental and profit maximisation. You could over-incentivise someone in his employment by giving the person a large portion of his package by way of a variable pay bonus.If you give the person an additional month or two bonus as salary, that’s one thing. If you say to the person that for every 100 dollar increase in rental income in that year, I will give you a big share of the increase, then you incentivise the person in a different direction. And bearing in mind the people that the Link serves, I think there is a case to answer.
Q: What do you mean by you are curious? Are you saying they’re doing something wrong?
A: I’ve looked at the figures and you can do some research. How much is fixed pay? How much is variable pay? And on the variable pay, how is that variable pay structured? You could say at the end of the year, the chairman of the board will sit down with the CEO and review the performance of the company and the performance of the person and the two sides could negotiate on the bonus. That’s one way of doing it. Then you could say it’s a fixed two-month extra pay. Or you could say, any increase in rental income in the past 12 months, I will give you a big chunk of it. Now then you incentivise a person in a very particular way that could carry social consequences. I think there is a case to answer.