Opinion | Cutting executive pay at state-owned firms only part of Beijing's plan
Hu Shuli says the reform will rationalise the roles of the many employees who are both official and executive, amid overall restructuring
The distorted salary structure for the top executives of China's state-owned enterprises is undergoing major surgery. On August 18, the Central Leading Group for Comprehensively Deepening Reform announced a plan aimed at slashing their pay, among other reforms. Eleven days later, the Politburo approved these measures.
State-owned enterprises, especially the major ones directly under the control of the central government, are notorious for their fat-cat incomes. Top executives at these companies double as civil servants and enjoy generous perks along with the high pay. Some are paid over 10 million yuan (HK$12.6 million) a year.
Worse, the structure that determines the sums is itself problematic, and the supervision lax. This encourages greed, corruption and waste. The Politburo's decision to regulate executive pay is long overdue.
As the government puts it, the overhaul is an important part of bigger plans to modernise the management of state-owned enterprises, and of efforts to improve income distribution.
It's far too early to tell if the plan will succeed - most of its details remain under wraps. But it's a pity that much of the attention has been focused on the scale of cuts to executive pay, as the scope of the entire plan is much wider. Besides regulating pay, the blueprint also sets out to improve and restructure operations, strengthen oversight and raise standards.
The reform is targeted at the executives appointed by the Organisation Department of the Communist Party's Central Committee. These include the State Council representatives stationed at the state firms, as well as the chairmen, party secretaries, general managers, chief executives and others who are similarly both official and executive.