Behind the Numbers: State Capitalism and Executive Compensation in China
University of Pennsylvania Asian Law Review (Vol. 12, 2017 Forthcoming)
44 Pages Posted: 6 Feb 2017 Last revised: 1 Mar 2017
Date Written: February 3, 2017
The rapid rise of Chinese companies in the global economy has attracted great scholarly attention to Chinese corporate governance. Among the various areas of Chinese corporate governance, executive compensation is an important yet difficult part to research. The common research method of Chinese executive pay literature relies on pay figures disclosed in listed companies’ annual reports and tends to take the disclosed numbers at face value. This Article discusses three informal pay practices that constrain the usefulness and reliability of executive pay data formally disclosed in annual reports of Chinese listed companies, especially those owned by the state. A valid reading of formal pay figures entails an understanding of the network structure and the political environment in which Chinese companies operate. An investigation of the practices behind formal compensation numbers sheds light on many issues for scholars and policymakers, the salience of which escalates as the international interaction with Chinese companies expands. For example, it stresses the important role of political institutions in shaping executive compensation; it raises questions about the extent to which international cross-listing improves transparency of Chinese companies; it critically evaluates whether China’s latest reform policy deals with the real problems of its state-owned enterprises; it spotlights the lacuna of extant scholarship on Chinese executive compensation.
Keywords: executive pay, state-owned enterprise, business group, disclosure
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