Hong Kong Business Leaders Believe They Are Paid Too Much

by CFO Innovation Asia Staff, 14 August 2012

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Grant Thornton International Business Report Senior executive compensation

More than three-quarters (78%) of business leaders in Hong Kong believe that senior executives at large public companies are paid too much, leading to a call for greater shareholder involvement in establishing remuneration policy for senior executives (80%) and disclosure of the remuneration policy and individual remuneration of executive and nonexecutive directors (68%), according to the research from the Grant Thornton International Business Report (IBR).

These results are in line with the latest amendments by the Stock Exchange of Hong Kong (SEHK) on corporate governance requirements for companies, which are being implemented in stages this year.

Effect of recent scandals

More Hong Kong business leaders believe that senior executives are paid too much, when compared to those in Asia Pacific (63%) and around the world (66%).

“The recent reports of scandals in political and business circles could lead business leaders in Hong Kong to think that senior executives are earning too much, both in kind and in cash," says Eugene Ha, advisory partner at Grant Thornton Hong Kong.

Ha adds that although these scandals do not have direct links to compensation, the trust and credibility the public has towards political leaders and CEOs are eventually breached. "The general public, therefore, require more objectivity and transparency when determining the remuneration of senior executives.”

Indeed, a Grant Thornton study on corporate governance practices in Hong Kong finds that the average maximum bonus as a percentage of salary for Hong Kong listed companies is 455%, demonstrating that senior executives in Hong Kong are paid significantly well.

According to the IBR, 86% of Hong Kong business leaders agree that executive remuneration at public companies should be closely linked to performance targets.

The report also notes that more business leaders prefer greater shareholder involvement to establishment of remuneration policy in response to overpaying of senior executives. This might imply that people actually want to be involved rather than be informed.

"Moving forward, it is worthwhile to further consider who should be involved in deciding the remuneration of senior executives, other than the remuneration committee and the shareholders,” says Ha.

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