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China's SOE Managers Get More Pay
Ni Yonggui, general manager of the state-owned Yida Electronic Company, based in Yingkou of northeast China's Liaoning Province, took home 116,000 yuan (about 14,000 US dollars) as his annual salary last year.
This is the second time Ni has pocketed annual compensation for effective management since the company adopted a trial yearly salary system in 1999. He earned 65,000 yuan (about 8,000 US dollars) in 1999.
Up to now, managers of 175 state-owned enterprises (SOE) in China's traditional industrial base of Liaoning are benefiting from the annual salary system, which ties managers' take-home pay with job performance.
Statistics show that before the new system was adopted, the average salary of SOE managers was only two or three times that of their subordinates, drastically contrasting their heavy work loads with the ordinary workers' responsibilities.
The annual salary system, a widely adopted practice in foreign countries and China's privately owned enterprises, is a novel move to save the country's once debt-ridden SOEs from financial ruin.
The new distribution norm has traveled a bumpy road to acceptance because it leads to an income gap between SOE managers and common workers.
"If the government allows me an annual salary of one million yuan, I am not going to receive it. The handsome pay will increase the enterprise's operational cost and dim my subordinates' enthusiasm for their work," remarked the chairman of a large SOE in east China's Anhui Province.
However, as China's enterprise reforms continue to deepen, more and more people are in favor of the new system.
A recent survey showed that some 75 percent of common SOE workers voted for allowing their bosses to get a higher annual salary. The percentage is even higher than the 60 percent of supporters among the sampled SOE managers.
Sources with the country's departments of labor and social security said that increasing SOE managers' salary has become a key step in the country's ongoing enterprise reform.
Other departments stipulated that the new compensation system was only applicable to the board chairman and general manager of SOEs.
In enterprises that use the annual salary system, management positions are no longer appointed by higher-ups but remain to open competition. In order to become an SOE manager, an applicant has to convince the selection board that his plans for the company are feasible.
Those who fail to implement their plans will be removed from their management position, according to regulations.
"I have been tossing and turning at night since my company adopted the annual salary system," said Zhang Daming, general manager of Liaoning-based Northeast Piano Producing Company. "If there is anything wrong with the operation of the enterprise, I am going to not only lose my salary but also my job."
With pay tied to job performance, China's SOE managers have shed their administrative functions and begun to operate SOEs' in accordance with market rules.
Sources said that most of the enterprises adopting an annual salary system in China are running in the black. But the system has also been used in some of those trapped in long-standing loss.
Meng Fanli, a senior official in Yingkou, said that the annual salary system had helped five poorly-managed enterprises in the city to regain their growth dynamic.
"Before the local government approved the system in 1999, these five enterprises faced a total loss of some 68.5 million US dollars. One year later, the number dropped to 38.8 million US dollars as a result of the system. Meanwhile, the average income of the enterprises' employees witnessed a 18 percent increase," said Meng.
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