Apart from speculating about who will replace outgoing Monetary Authority chief executive Joseph Yam Chi-kwong, most commentators are also wondering about his successor's pay package. The general consensus is that it should be less than Mr Yam gets. But how much less?
Last year, Mr Yam pocketed about HK$12 million, or US$1.5 million, which included basic salary, bonus and other benefits. By comparison, Ben Bernanke, chairman of the US Federal Reserve Board, the most important central bank in the world, earned less than US$200,000.
But it would be crude and, in a way, unfair to use this benchmark to adjust the HKMA chief's package. After all, by this measurement, every Hong Kong public official and civil servant would be grossly overpaid.
There is, in fact, an established mechanism for determining the pay of the senior executives of statutory bodies, including those of the HKMA. In 2002, the government commissioned a consultancy study on the remuneration of senior executives in selected statutory, and other, bodies.
The consultant proposed a number of principles for determining a reasonable remuneration package. First, the median of the total remuneration of the relevant tier of the private-sector comparison group should be the benchmark for the position under review. Second, qualitative factors such as prestige, public service and job security should determine an appropriate adjustment.
For the post of head of the HKMA, the consultant proposed a private-sector comparison group comprising mainly commercial banks and asset management firms. It also suggested that the qualitative factors should result in a 10 per cent downward adjustment from the benchmark level. As a result, the consultant recommended a pay package of HK$7.25 million a year; 80 per cent fixed salary and 20 per cent variable pay or bonus, based on performance. The government and legislature accepted the consultant's recommendations in 2003.
Although this was less than the HK$8 million Mr Yam was earning at the time, the government and the subcommittee which makes recommendations on HKMA remuneration packages agreed not to reduce his pay, given his long experience and outstanding performance. With Mr Yam's imminent departure, it is now time for the government and legislators to assess what would be a reasonable package for his successor. Following the two main pay principles adopted in 2003, the government should update the private-sector comparisons for the HKMA's senior executive posts. It should consider whether the comparison group ought to include more non-financial companies; the HKMA's work as a regulator is actually quite different from that of commercial banks. Also, in managing the Exchange Fund, it operates quite differently from a private asset management firm.