It is results season again. Apart from the ups and downs of company profits, you have heard and will continue to hear a lot about how much the chairmen or chief executives are making. You may have choked on some of these pay awards. Just remember that when it comes to the management of mainland enterprises, don't show your admiration or anger too early. What you are seeing may not be the real thing, as is invariably the case in China. Senior management of many mainland enterprises, in particular the red chips, are making about HK$10 million a year on paper. In the case of China Mobile, chairman Wang Jianzhou made HK$9.43 million last year. That includes HK$1.17 million in salary, HK$660,000 in discretionary bonus and HK$7.16 million fair value of share options. That's quite a fortune in the mainland. Yet, the truth is, in many such cases, take-home pay is much less than that. A large portion of a top executive's remuneration is returned to the parent company or related authorities. That has always been the case since the listing of mainland enterprises overseas. You may call that an unfair subsidy to the parent company. A red chip manager calls it a 'redistribution of wealth'. The figure on paper is what foreign investors believe can provide management with incentive. Even the profit from share options, which are supposed to provide the carrot, is not spared. Some parent companies even have their own investment arms deciding when the management should exercise the options and when to sell. The management is no more than a list of names that hold the options. The split between the individual and the parent company has always been a well-guarded secret. It varies with the individual's seniority in the civil service hierarchy and industries. Take the case of the chief executive of a mainland financial institution in Hong Kong who received only 30 per cent of his reported salary. Needless to say, this system breeds corruption. In fact, this officer is now in jail for taking bribes. In the past few years, the parent-takes-all approach has changed. Officers are allowed a larger cut of their salary. Also, they can now enjoy part of the share option returns. In one of the provincial red chips, returns from share options and part of the management salaries are pooled into a fund controlled by the parent company. Should the profit of the listed unit hit a target, bonuses would be drawn from the fund to reward the management at both the parent and listed companies. 'It is a balance between individual incentives and the feeling of the majority,' said a red chip executive. This is understandable given that most chairmen and general managers of key firms are political appointees; that is, they can be removed or appointed by the government at any time. Just imagine the political difficulty a chief executive would face if he is transferred to head a provincial unit if he is actually earning HK$10 million a year. Besides, it is difficult for most people - be they company staff or the public - to recognise the personal merits of a government-appointed chairman. Support from parent companies is also important in the smooth functioning of the listing entities. Some oil is needed and there is no better lubricant than money. Of course, it is impossible for outsiders to know exactly how much a chairman is getting and whether that's a big enough carrot. One may find some help in an incentive guideline released by the State-owned Assets Supervision and Administration Commission in December last year. This guideline applies to all centrally owned enterprises and their subsidiaries. Senior management of these companies are graded A, B, C, D and E classes according to some tough profit and assets tests. While the last two classes will face financial penalties, the first three classes will be given bonuses. Grade A managers will get two to three times their basic salary. Yet only 60 per cent of the bonus will be paid up front. The rest will depend on the financial results for the following year. That is 'incentives' by mainland standards. Call it a small step but at least it's a step forward.