It has long been controversial for the top executives of State-owned enterprises to receive annual incomes of millions of yuan while still enjoying privileges identical to ranking officials. Reform of the salaries and privileges for these executives, which was discussed on Aug 18 at a meeting of the central leading group on deepening reforms, will hopefully change this.
Party leader Xi Jinping, also head of the leading group, said the incomes for such executives will be reasonably regulated. He urged that SOE executives should have a strong sense of responsibility and a sense of devotion, since they shoulder the missions of running State-owned enterprises well and developing the State economy.
The message is that the average income of SOE executives will probably decrease and they will not have as much power as they are used to over the money of the enterprises they are in charge of.
The executives of SOEs are placed in charge of the firms on behalf of the State and the people. But some SOE executives consider the enterprises that are in their charge as their own. The former leader of Sinopec, who was sentenced to death with a two-year reprieve for abuse of power, used to spend several million yuan a year for his own enjoyment.
It was far too natural for the incomes of these executives to increase even when the SOEs under their charge suffered losses. It seems that how much they earn has nothing to do with the performance of the companies they are running.
Yet the performance of the SOEs should have a lot to do with how much income the executives of those companies get. So the system to link their pay with corporate performance is exactly what the current reform will address.
Yet, reform is not easy. And it is even harder for reform to overcome the vested interests involved. The majority of SOE executives will not be bold enough to resist the reform but some will circumvent the rules wherever possible to retrieve their lost interests.
So to ensure the reform is a success, supervision must be tightened over SOE executives to make sure they toe the line. Just as the leading group’s decision said, it is time to make it real for the reforms.