SOE salary reform sets an example

The disclosure of these top executives' salaries has also been mentioned in the regulation. Their income has often been a mystery because some managers can conveniently use the company's money to cover their personal expenses. For instance, the company's automobiles are at their disposal; they can travel abroad ostensibly on business; and they are entitled to various extra benefits such as medical costs, houses and their children's education. In other words, many of these managers don't have to rely on their salary for a living.

With the new reform in place, all their salaries will be made public so that any hidden income can be rooted out. The regulation has also stipulated that SOE executives who hold part-time posts in the company's subsidiaries, holding enterprises or shareholding enterprises should not receive any kind of remuneration, salary, bonus or allowance. Retired executives should not continue to receive salaries from the companies they used to work for.

So far, 72, or roughly half of the total number of central SOEs are subject to the new salary policy. Although that number may seem very small, these companies hold very important positions in the national economy, for instance they include the China National Petroleum Corp, the Sinopec Group, and China Mobile Communications Corp. Even a single spark can start a prairie fire. The salary reform, if stringently implemented, will produce a ripple effect and can spread to cover the tens of thousands of SOEs across the country, so as to narrow the income gap by correcting these unjust parts of the income distribution mechanism.

The author is associate researcher of the salary research department of the Ministry of Human Resources and Social Security.