"It's not what you pay a man, but what he costs you that counts." -Will Rogers, Actor

There exists some ambiguity surrounding the issue of executive compensation in China. It is well known that the job market in China can appear daunting for executives and one of the main factors is arguably the guarded attitude towards executive pay. Perhaps if there were more transparency in China on this topic, we may start to see more clarity surrounding the executive job market in China.

Equally, an article in Time Business has recently been published which sheds some light on Executive pay in China. The article states that, "The main source of income for top executives in China is not the disclosed annual compensation or bonuses and dividends, but hidden payments." These hidden payments come in the form of company expenses. Therefore, an executive in China can expect their compensation to be subsidized very heavily in travel expenses, entertainment expenses, housing expenses and communication expenses. These are all classed as administrative expenses, and are considerably more extensive than most other Emerging Market, and Asia Pacific countries.

The article suggests that some executives can expect to receive more compensation in terms of expenses than they gain annually from salaries. "Using administrative expenses, as disclosed in annual reports, Gao Minghua, director of the Research Center for Corporate Governance and Enterprise Development at the Beijing Normal University, compared on-duty consumption and annual revenue, and listed the top 100 public companies in China in 2010 in terms of on-duty consumption as a percentage of annual revenue for the year. In 10 of the companies, the on-duty expenses exceeded the revenues." Time Business

Interestingly, a 2011 report which the AESC carried out on executive compensation in China revealed that 28% of executives in China felt that their compensation had become more globally competitive in the last 5 years, with 46% of executives answering that they felt it had moderately increased. Additionally, when asked how China compares to other countries over executive pay, China was ranked third highest by executives working in China. The report suggests that generally executives working in this country thought The United Kingdom, Germany and The United States were higher paid, but thought China had higher levels of compensation than India and Brazil. In actuality China had significantly lower salaries for executives, but significantly higher administrative compensation. Moreover, the report does not indicate in what context executives in China are referring to their compensation. If the executives included their expenses and administration allowances, arguably they could be on a par with The USA and The UK.

Overall, the political backdrop in China could be one reason why companies have adopted this stance on compensation. Another could be the laws and regulations in China at the moment. Whether this is a fair or welcomed practice remains undetermined. What is interesting is that executives in China appear to see their compensation as globally competitive, although not based heavily on stocks and shares. Furthermore, when asked, most executives in China suggested that they had long term plans to stay and work in China.

The AESC has member executive search firms located throughout China, all with access to your BlueSteps career profile and CV.
This article was written by Helen Langley of the Association of Executive Search Consultants (AESC).
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