Slashing Executive Salaries At Chinese Public Companies

For China's State-Owned Enterprises, new reforms are aimed at linking senior management pay to the company's performance.

Passing time in Beijing's Tiananmen Square
Passing time in Beijing's Tiananmen Square
Feng Qingyan, Zhang Nan and Ke Guan

BEIJING â€" Over the past several months, China’s central government has implemented substantial salary cuts for the executives of state-owned enterprises (SOEs). The moves are part of an overall effort to revamp the SOE pay system so as to make salaries more dependent on company profits and efficiency.

The first round of salary cuts involved senior managers of 72 centrally-owned corporations, including PetroChina and State Grid, energy giants long criticized for gaining high profits through their monopoly positions. Total wages among their senior executives have been reduced by approximately 15%, one anonymous source at PetroChina told the Economic Observer.

China Mobile has announced even larger pay cuts. During its recent mid-year review meeting, the company said the salary decreases (of up to 50%) primarily target senior managers and will not, therefore, affect all employees. One insider at China Mobile said the company began implementing the changes in February, and that the salary package cuts have prompted a wave of departures.

SOE employees used to earn considerably lower than their peers working for foreign companies or in the private sector. But starting in 2003, when China founded the State-owned Assets Supervision and Administration Commission (SASAC) and introduced economic reforms to restructure the SOEs, salary packages dramatically improved â€" to the point that in some cases, top level managers actually earn more than their private sector counterparts.

"In the SOE petrochemical industry, for example, top managers earn 80% more than their peers working for multinationals," says Cai Feng, a former SOE executive who is now the president of a privately listed company.

Distorted salaries, privileged positions

The pay increases and growing employee numbers, according to Cai Feng, have had a negative effect with regards to the profitability, vitality and operational efficiency of the large SOEs.

PetroChina Biejing HQ â€" Photo: Charlie Fong

Liu Xiangli, and SOE expert at the Academy of Social Sciences, says that state-owned companies have benefited from advantages in scale, resources and performance that are based on an historical and institutional context rather than market competition.

Senior SOE managers, furthermore, have unsupervised control over the companies' revenue distribution, incentive schemes, welfare programs and professional expenses. There is always the temptation, therefore, to engage in "self-enrichment."

And since top SOE executive posts are administratively appointed by the SASAC, there is basically no selective elimination mechanism. As one SASAC official said, “In theory the SASAC has to rearrange posts when a party in question is unsuitable or incompetent, but in practice reallocating an executive is very hard because of the limited available posts which would satisfy the concerned party.”

Li Jin, vice-president of China Enterprise Reform and Development Society, says the direct cause of the current pay cuts is the temporary business downturn of the SOEs. But there is more to these efforts, he says, than just cutting costs. The larger goal is to restructure the system by making salaries more dependent on performance â€" so that the case of "a poor temple with a rich abbot no longer happens.”

Liu Junhai, director at the Business Law Institute of Renmin University, says that a corporation’s vitality comes from its employees. Associating regulation and incentive is indispensable, he says, for generating enthusiasm and encouraging creativity.

“Neither rewards without merits nor excessive rewards are appropriate,” he says. “This pay cut is not in itself the goal. The important thing is to form a market regulation mechanism so that eventually people earn what they really deserve.”

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How Thailand's Lèse-Majesté Law Is Used To Stifle All Protest

Once meant to protect the royal family, the century-old law has become a tool for the military-led government in Bangkok to stamp out all dissent. A new report outlines the abuses.

Pro-Democracy protest at The Criminal Court in Bangkok, Thailand

Laura Valentina Cortés Sierra

"We need to reform the institution of the monarchy in Thailand. It is the root of the problem." Those words, from Thai student activist Juthatip Sirikan, are a clear expression of the growing youth-led movement that is challenging the legitimacy of the government and demanding deep political changes in the Southeast Asian nation. Yet those very same words could also send Sirikan to jail.

Thailand's Criminal Code 'Lèse-Majesté' Article 112 imposes jail terms for defaming, insulting, or threatening the monarchy, with sentences of three to 15 years. This law has been present in Thai politics since 1908, though applied sparingly, only when direct verbal or written attacks against members of the royal family.

But after the May 2014 military coup d'état, Thailand experienced the first wave of lèse-majesté arrests, prosecutions, and detentions of at least 127 individuals arrested in a much wider interpretation of the law.

The recent report 'Second Wave: The Return of Lèse-Majesté in Thailand', documents how the Thai government has "used and abused Article 112 of the Criminal Code to target pro-democracy activists and protesters in relation to their online political expression and participation in peaceful pro-democracy demonstrations."

Criticism of any 'royal project'

The investigation shows 124 individuals, including at least eight minors, have been charged with lèse-majesté between November 2020 and August 2021. Nineteen of them served jail time. The new wave of charges is cited as a response to the rising pro-democracy protests across Thailand over the past year.

Juthatip Sirikan explains that the law is now being applied in such a broad way that people are not allowed to question government budgets and expenditure if they have any relationship with the royal family, which stifles criticism of the most basic government decision-making since there are an estimated 5,000 ongoing "royal" projects. "Article 112 of lèse-majesté could be the key (factor) in Thailand's political problems" the young activist argues.

In 2020 the Move Forward opposition party questioned royal spending paid by government departments, including nearly 3 billion baht (89,874,174 USD) from the Defense Ministry and Thai police for royal security, and 7 billion baht budgeted for royal development projects, as well as 38 planes and helicopters for the monarchy. Previously, on June 16, 2018, it was revealed that Thailand's Crown Property Bureau transferred its entire portfolio to the new King Maha Vajiralongkorn.

photo of graffiti of 112 crossed out on sidewalk

Protestors In Bangkok Call For Political Prisoner Release

Peerapon Boonyakiat/SOPA Images via ZUMA Wire

Freedom of speech at stake

"Article 112 shuts down all freedom of speech in this country", says Sirikan. "Even the political parties fear to touch the subject, so it blocks most things. This country cannot move anywhere if we still have this law."

The student activist herself was charged with lèse-majesté in September 2020, after simply citing a list of public documents that refer to royal family expenditure. Sirikan comes from a family that has faced the consequences of decades of political repression. Her grandfather, Tiang Sirikhan was a journalist and politician who openly protested against Thailand's involvement in World War II. He was accused of being a Communist and abducted in 1952. According to Sirikhan's family, he was killed by the state.

The new report was conducted by The International Federation for Human Rights (FIDH), Thai Lawyer for Human Rights (TLHR), and Internet Law Reform Dialogue (iLaw). It accuses Thai authorities of an increasingly broad interpretation of Article 112, to the point of "absurdity," including charges against people for criticizing the government's COVID-19 vaccine management, wearing crop tops, insulting the previous monarch, or quoting a United Nations statement about Article 112.

Juthatip Sirikan speaks in front of democracy monument.

Shift to social media

While in the past the Article was only used against people who spoke about the royals, it's now being used as an alibi for more general political repression — which has also spurred more open campaigning to abolish it. Sirikan recounts recent cases of police charging people for spreading paint near the picture of the king during a protest, or even just for having a picture of the king as phone wallpaper.

The more than a century-old law is now largely playing out online, where much of today's protest takes place in Thailand. Sirikan says people are willing to go further on social media to expose information such as how the king intervenes in politics and the monarchy's accumulation of wealth, information the mainstream media rarely reports on them.

Not surprisingly, however, social media is heavily monitored and the military is involved in Intelligence operations and cyber attacks against human rights defenders and critics of any kind. In October 2020, Twitter took down 926 accounts, linked to the army and the government, which promoted themselves and attacked political opposition, and this June, Google removed two Maps with pictures, names, and addresses, of more than 400 people who were accused of insulting the Thai monarchy. "They are trying to control the internet as well," Sirikan says. "They are trying to censor every content that they find a threat".

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