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How Much Influence does the Chinese State have Over CEOs and their Compensation?

In: International Perspectives on Participation

Author

Listed:
  • Alex Bryson
  • John Forth
  • Minghai Zhou

Abstract

All that we know about the Chief Executive Officer (CEO) labour market in China comes from the studies of public listed companies and State-owned Enterprises (SOEs). This is the first attempt to examine the operation of the CEO labour market across all industrial sectors of the Chinese economy. We find that the influence of the State extends beyond SOEs into many privately owned firms. Government is often involved in CEO appointments in domestic firms and, when this is the case, the CEO has less job autonomy and is less likely to have pay linked to firm performance. Nevertheless, we find that incentive schemes are commonplace and include contracts linking CEO pay directly to firm performance, annual bonus schemes, the posting of performance bonds, and holding company stock. The elasticity of pay with respect to company performance is one or more in two-fifths of the cases where CEOs have performance contracts, suggesting many face high-powered incentives. We also show that State-owned and domestic privately owned firms are more likely than foreign-owned firms to use incentive contracts.

Suggested Citation

  • Alex Bryson & John Forth & Minghai Zhou, 2014. "How Much Influence does the Chinese State have Over CEOs and their Compensation?," Advances in the Economic Analysis of Participatory & Labor-Managed Firms, in: International Perspectives on Participation, volume 15, pages 1-23, Emerald Group Publishing Limited.
    • Handle: RePEc:eme:aeapzz:s0885-333920140000015001
    DOI: 10.1108/S0885-333920140000015001
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    More about this item

    Keywords

    Executive compensation; job autonomy; CEOs; China; the state; G34; J31; J33; M12; M52; O16; P31;
    All these keywords.

    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
    • M12 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Personnel Management; Executives; Executive Compensation
    • M52 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • P31 - Political Economy and Comparative Economic Systems - - Socialist Institutions and Their Transitions - - - Socialist Enterprises and Their Transitions

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