Two of its biggest fund managers China announced that they are cutting executives’ sky-high salaries and even asking them to return the extra money they received compared to the previous year.
China Merchants FM and Bosera Asset Management have announced that annual compensation for top executives will be capped at around 3 million yuan (379,493 euros) starting this year. They have even asked executives who received more than that amount to return the extra money within a month. According to Chinese sources, around 60 top executives from the two groups will be affected by this decision.
China Merchants FM is China’s sixth-largest fund manager with 551 billion yuan, and Bosera, with 527 billion yuan, is the seventh-largest.
Main wage for senior executives in China ranged from 1.6 million to 6 million yuan per year in 2023, according to the Morgan McKinley Salary Guide.
However, it is not uncommon for the salaries of senior executives or successful fund managers to exceed 10 million yuan and can reach several hundred million during fund boom periods.
The upper limit on high wages is one consequence of the “shared welfare” policy recently adopted by China’s CPC Central Committee to reduce income inequality in the country as growth slows.
The Shanghai Stock Exchange’s watchdog also tightened its pay policy after being accused of high salaries despite the modest performance of Chinese stocks.
Some banks have taken similar measures, particularly targeting investment bankers, whom Beijing describes as “hedonists” with lavish lifestyles.
In a document released Sunday after a meeting of the Central Committee of the Communist Party of China, the government said that “income distribution and forms of wealth accumulation will remain well regulated” and that excess income will be “properly regulated.”
Expert Notices
Capping income will make it harder to recruit and retain workers and will discourage managers from performing, industry experts warn.
“From now on, no one will want to put in the effort to sell products. We may just sit around and do nothing just to keep our jobs because we are too afraid of having to pay back the money we are being paid,” explains a sales manager at a fund management company in Beijing.
“Wages definitely need to be adjusted, but asking for the return of overpayments from the previous year is against the spirit of the contract between the company and the workers,” said Maddy Wang, former head of Morgan Stanley’s China fund management business. “This is a bad idea and will have long-lasting consequences,” she warned.