Executive Pay at Publicly Listed Firms in China

Abstract

This article explores the executive compensation structure in China. Using unbalanced panel data on 17,178 executives in 1,386 publicly listed firms in China during 1999–2006, we find that (1) both executive pay and the pay gap between executive ranks increased over time; (2) pay distribution skews toward the top of the firm, with the pay gap between the CEO and the second-tier executives (vice presidents) being the largest; (3) the pay gap between the CEO and vice presidents increases with the number of vice presidents; (4) executive pay dispersion is positively related to the variation in firm performance; and (5) executive pay is negatively related to state ownership. Overall, our study shows that the executive pay structure at publicly listed firms in China has started to resemble that seen in developed market economies. This development represents an important change from the egalitarian ideology that prevailed before the economic reforms.