The catch: long-term incentives remained low.
According to Ernst &Young’s 2011 Mainland China and Hong Kong Executive Compensation Report, total cash compensation of Mainland China CEOs in A share companies increased by 5% (median) in 2009 during the financial crisis and by 12% (median) in 2010. In the Hong Kong market, total cash compensation of listed companies’ CEOs increased by 19% (median) in 2010.
In terms of compensation levels, Hong Kong based listed companies paid much higher median total cash compensation to CEOs (RMB 12.7 million) than Mainland based listed companies (RMB 2 million) and A share companies (RMB 0.9 million) with similar market capitalization.
Meanwhile in terms of sectors, there were significant differences among sectors in both Mainland China and Hong Kong markets. The finance sector had the highest median total cash compensation levels across all executive positions with RMB 2.16 million for CEOs in Mainland China. In Hong Kong, the real estate sector paid the highest median total cash compensation to CEOs (RMB 7.3 million).
However, compared to other developed markets, Long-Term Incentive was not commonly used in either market. This was particularly true in Mainland China. According to the report, only 9% of A share companies had LTI plans and only 21% of these paid LTI awards in 2010. Generally, the average proportion of LTI in total compensation was less than 1% for executives of A share companies. In Hong Kong, 67% of companies had at least one LTI plan in place; of these, only 29% granted LTI awards during 2010. The average proportion of LTI in total compensation was less than 10%, which was higher than that of the A share market, but lower than other developed markets.
Ernst &Young’s 2011 Mainland China and Hong Kong Executive Compensation Report provides an analysis of executive and independent/non-executive director compensation for main board listed A share companies in Mainland China and the largest (by market capitalization as of 31 December 2010) 200 companies listed in Hong Kong. The report analyzes compensation levels and mix, Short-Term Incentive plans, Long-Term Incentive plans, independent/non-executive director fees and corporate governance practices.
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