There have been a number of posts recently on the PRSPCT-L listserv on Chinese executive salaries and some of the challenges in determining what these are. Have a look at the following interesting components of that conversation. BTW, if you’re not subscribed to the listserv, it’s one of the best interactive places to discuss and ask questions about various aspects of prospect research and management.
When you consider a Chinese executive’s compensation, bear in mind the currency exchange issues. Although $150,000 sounds modest in the U. S. or Australia, but that is roughly 930K+ yuan, which is a sizable salary, if you compare to the living cost and the median salary in China.
To look at a bigger picture, Asian executives (not only in China) usually do not get paid as high as their counterparts in the U. S. See this April 2015 Korean Herald article, Huge Salary Gab between Korean and U.S. Superrich and last year’s Nissan’s $10-Million CEO Set to Top Japan Pay Rankings.
When researching Chinese parents, throw their name, spouse’s name, children’s name in LexisNexis and see if any of them own any property in the U.S. Search that in Australia too, as many wealthy Chinese families tend to buy properties where their children go to school. Also, Capital IQ provides decent information on publicly-traded international companies’ compensation information.
Check Sina Finance for public companies’ compensation and stock holding information, but unfortunately that’s in Chinese only. Some large HR consulting groups publish salary survey each year in the Greater China area, which might also shed light on salary information for the Chinese executives.
This article in the Journal of Law & Commerce (Lin, 2014) found that “executives of state-owned enterprises are largely compensated by on-duty consumption, grey income and political reward.” So you’re likely just seeing the tip of the iceberg for executive compensation.
Some findings that may be helpful:
· A study of 1,320 Chinese listed companies found that the aggregate amount of on-duty consumption spent by executives was 2 to 50 times their average compensation between 2002 and 2009.
· Grey income such as housing allowances and shopping vouchers are a major source of income for executives in state-owned enterprises (SOEs) in monopolized industries.
· As executive pay of SOEs is subject to a cap set by the SASAC, it is not surprising that executives rely on political rewards as their incentives. In fact, it is very common for top executives in Central SOEs to hold vice ministerial rank. It is also a general practice that these executives serve as senior government officials such as provincial governors and members of the State Council after their term of office in the SOEs.
Here is a 2014 article from the FT that briefly discusses the compensation issue:
According to one researcher quoted in the article, executives
“don’t get that much cash, but that’s just a fraction [of their true compensation]. There’s also cars, phones and other so-called ‘business compensation’. So the figures in the annual report can’t fully reflect what they get.”
One thing you can do to get around this official compensation/ actual compensation problem is to look at other assets. For instance, if you see that your prospect has an official salary of US$150,000 is living in a luxury building where apartments have current market values of US$2 million+, you can see that there is a disconnect. Looking for those kinds of gaps between official income and other signs of wealth can help you build a case that your prospect has additional compensation outside of the officially disclosed amounts you see in annual reports.