Cutting salaries of CEOs not enough

China has decided to impose a cap on the salary of State sector bosses in its latest reform drive targeted at the controversial group of top executives.

To make the initiative a success, there must be a transparency mechanism in place that ensures the public can supervise the income of the State sector managers.

Although it has not been decided how steep the cuts will be, those fat cats are set to be put in closer scrutiny.

Some of the senior State enterprise managers can earn more than 5 million yuan ($810,000) a year as salary while the annual disposable income of an ordinary Chinese urbanite is only 27,000 yuan in 2013, according to open documents released by listed State companies.

Given the wide income gap, it is a must for the central authorities to impose a cap on the salary of senior State sector managers if it is to appease public complaints.

The ambiguous dual status of some top State sector managers, especially those who manage the central enterprises directly under the State Council, is also a problem to solve. While they are semi-officials carrying vice-ministerial or ministerial-level ranking, they are also corporate executives that are paid by market standards and earn much more than their fellow officials.

To solve the problems, policymakers reportedly have drafted detailed plans on how to reform the reward system for State sector bosses. While across-the-board pay cuts are possible, it could also be stipulated that pay for those who are appointed by the government or serve the monopoly sectors should be put under strict control whole that for managers hired from the market can be paid much higher in accordance with their performance and market levels. Moreover, long-term options could be introduced as incentives for those top corporate executives.