Senior officials at the mainland's biggest state-owned companies face the prospect of fewer - and slimmer - red envelopes this year, as falling earnings trigger pay cuts and Beijing calls for financial sector compensation to be controlled. Senior management at state-owned financial firms such as Industrial and Commercial Bank of China, Bank of China, China Construction Bank and dozens of smaller rivals can expect less 'lucky money' following a Ministry of Finance directive. It called for more 'reasonable control' of executive pay and expense accounts and issued a moratorium on stock options for executives. Already, key state-owned industrial companies such as Aluminum Corp of China (Chinalco) are implementing pay cuts as earnings collapse in the face of falling prices and a broad industrial slowdown. New details about pay cuts at Chinalco, the mainland's biggest producer of alumina and aluminium, emerged yesterday. Xinhua reported that the company planned to reduce labour costs by 30 per cent after slashing compensation for all management-level employees by 30 to 50 per cent. Top executives will have their pay slashed the most. Earlier this month Chinalco deputy general manager Lu Youqing said the planned pay cuts would save 3 billion yuan (HK$3.4 billion) to 4 billion yuan in costs and would be capped at 15 per cent for ordinary staff, rising to 50 per cent for top executives. For financial institutions, the government directive to curb executive pay follows a series of mainland press reports about industry high-fliers pulling in annual salaries greater than 10 million yuan. While modest compared with their Wall Street counterparts, mainland banking and finance executive pay packages have come under fire for being excessive. 'We must resolutely prevent ... compensation that is too high from being paid out,' the finance ministry said in a directive posted last week on its website. The order called for a ban on stock options for senior executives, for state financial firms to avoid widening the income gap between seniority levels and for corporate chiefs to be more modest with expense accounts. State companies should 'strengthen controls and inspection of management expenditures and curb ... violations of ostentation, extravagance and waste', the statement said. All state-owned financial firms are to report back to the ministry on their progress in implementing the new initiatives by Saturday.
