(chinadaily.com.cn)
Updated: 2007-07-25 10:29

Lack of oversight has caused a lot of problems. To cope with the problem, experts suggest setting up a pay and appraisal commission under the director board to design salary schemes and evaluate performance. SOEs should give a copy of their salary schemes to the State-owned Assets Supervision and Administration Commission of the Sate Council and also diversify the members of the commission. The members should include people ranging from independent board members and employee representatives to experts outside the companies and exclude management.

Many suggest that the current salary system is also unfair because right now there is no connection between company performance and executive salaries in SOEs, which gives rise to strange situations in which executives are receiving bonuses and benefits while companies are losing money.

In spite of existing laws requiring SOEs to link their salary to company performances, company managers are not under any scrutiny. The law is not enforced well because executives are able to judge their own performance.

To deal with the problem, experts also suggest establishing a long-term motivation mechanism, on the one hand by lowering basic salary and increasing performance salary and on the other, by raising the ratio of equity incentive to total salary.

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