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Senior executive salaries shrinking

by Chen Xiyu

 

A booming auto market in China brought sales increase of 20 percent and even higher profit margins in 2007. As a result, senior executives of public-listed companies in the automotive sector had an average salary raise of 20 percent accordingly.

 

Salaries of domestic senior executives of automotive sector

As revealed by the 2007 annual reports of public-listed auto-related companies, Chen Yuanqing, president of Jiangling Motors Corp., topped the rank with an annual salary of ¥1.75 million ($253,623), followed by the vice president of Fuyao Glass Industry Group Co., Ltd. who took in ¥1.14 million.

Growth rate of China’s automotive and supplier industry is expected to be no more than 8 percent in 2009, possibly below the GDP growth again. (The growth rate of 2008 was 6.7 percent, below the GDP growth of 9.0 percent). Take SAIC for example. SAIC sold a total of 1,720,650 vehicles in 2008, up 4.48 percent year-on-year, yet below the industry average. SAIC’s senior management took the initiative to slash pays. According to sources from SAIC, senior executives had their bonus and performance salary cut by 20 percent, and no salary raise in 2009. Besides, Dongfeng Motor Corp. (DFMC) also decided to cut wages of senior management.

<Chart 1>

 

Of all the 71 listed automakers and suppliers, nine (out of 25) automakers and 22 (out of 46) suppliers have published their 2008 annual reports. Executives from the following four companies – Guangzhou Shipyard International (SHA: 600685), Weichai Power (SHE: 000338), Xiamen King Long (SHA: 600686) and Zhengzhou Yutong (SHA: 600066) – were offered over ¥1 million in salaries. Executives of four automakers and nine suppliers have salaries nailed at ¥500,000-¥1 million.

<Chart 2>

Supplier executives holding higher share values

Many listed companies have adopted a staff recruitment policy of offering company stock to attract talents. In spite of the fact that supplier executives received lower average salaries than those of automakers, they held more company shares which accounted for over half of the yearly salaries.

Of the 25 listed automakers, senior executives of eight held shares; while among 46 automotive suppliers, senior executives of 14 held shares.

According to the closing price on March 24, executives from eight suppliers held over ¥5 million worth of shares each; while none from automakers fell into the category. Zhou Xiaofeng, president of Ningbo Huaxiang Group (SHE: 002048), held ¥600 million worth of shares in 2008, ranking top of automotive supplier executives, followed by Weihai Guangtai (SHE: 002111)’s chairman Li Guang with ¥500 million worth of shares. And senior executives of Terca Technology (SHE: 002213), Wanfeng Auto Wheels (SHE: 002085), Zongshen Power (SHE: 001696), Yinlun Machinery (SHE: 002126), Weichai Power (SHE: 000338), and Wanxiang Qianchao (SHE: 000559) ranked from the third to eighth places.

<Chart 3>

 

In general, senior executives of automotive suppliers held average share value of ¥119.6 million, way higher than the average of ¥1.04 million of those from automakers. 

<Chart 4>

Share value shrinking

The Chinese stock market was going down in 2008, which resulted in the shrinking of stock value of listed automakers and suppliers.

Tang Yuxiang, chairman of Zhengzhou Yutong Bus Co., Ltd. (SHA: 600066), held 336,042 shares in 2007 worth ¥115.8 million. Although he had 100,858 added shares in 2008, the value of his total shares plunged to ¥4.452 million for the year, down almost 100 percent from the previous year. The value of shares held by senior executives of Fuyao Glass (SHA: 600660) and SAIC Motor (SHA: 600104) fell by 68.3 and 66.2 percent respectively. Zuo Zongshen, chairman of Zongshen Power (SHE: 001696), received an annual salary of only ¥30,000, yet he held 10 million company shares. His shares closed at ¥237.8 million at the last trading day of 2007, yet it shrank to ¥109 million in 2008.

 

 

 

 

 

 

 

 

<Table 1>

Share value held by senior executives of listed automotive and supplier companies in 2008

Company                           Chairman                Shares               Share value (¥1 million)

Ningbo Huaxiang               Zhou Xiaofeng        89,936,800        617.87

Weihai Guangtai                Li Guangtai             31,602,500        499.32

Terca                                  Zhang Huimin         20,790,000        183.58

Wanfeng Auto Wheels       Chen Ailian             28,470,000        160.00

Zongshen Power                Zuo Zongshen         10,000,000        109.00

Yinlun Machinery             Xu Xiaomin            6,042,000          67.85

Weichai Power                   Tan Xuguang          4,300,000          18.32

Wanxiang Qianchao           Lu Guanqiu             2,376,600          14.19

Lower salaries in auto industry

Annual salaries of senior executives in automotive industry were lower than those in other pillar industries.

According to the salary ranking of senior executives of listed companies in 2007, Ma Mingzhe, chairman and CEO of Ping An Insurance (SHA: 601318), was on top with a salary of ¥66.16 million. Frank Newman, chairman of Shenzhen Development Bank (SHE: 000001), followed right behind Ma. Average annual salary of the top 20 senior executives reached as high as ¥8.16 million. Take China Vanke Co., Ltd. (SHE: 000002) and SAIC Motor, which are leading giants in real estate and automotive industries, for example. SAIC Motor chairman Hu Maoyuan received an annual salary of ¥640,000; while Wang Shi, chairman of China Vanke received ¥6.91 million annually. Many senior executives in real estate industry were offered a salary of over ¥1 million per annum. Yet only one senior executive of Jiangling Motors in automotive industry received a salary of over ¥1 million in 2007.

Household electronic appliances industry is commonly regarded as having “low profits,” but executives from this industry also got higher salaries than those from the automotive sector. For example, Zhu Jianghong, chairman of Gree Electric Appliances (SHE: 000651), had an annual salary of ¥1.45 million, and He Xiangjian, chairman of Midea Electric Appliances (SHE: 000527), earned a salary of ¥485 million a year, much more than that of any automotive executive listed in Chart 2.

<Chart 5>

 

Lower job security

Senior executives of listed domestic companies have been faced with unprecedented crisis in 2009. Dozens of senior executives and board members were dismissed in January alone. Over a dozen listed companies such as Bank of China (HKG: 3988), Air China Ltd. (SHA: 601111), Beijing Hualian Department Store Co., Ltd (SHE: 000882), Chongqing Brewery Co., Ltd. (SHA: 600132), Pacific Securities Co., Ltd. (SHA: 601099), Baida Group Co., Ltd. (SHA: 600865), and Premium Land Limited (HKG: 0164) have announced the resignations of company board members and independent directors. Some well-known corporations such as Marks & Spencer, Electrolux, Lenovo, Eastern Air, Hopson Development Holdings, Toyota, Samsung, and Hilton replaced their senior executives in China or even Asian and Pacific regions. Haier Group demoted six vice presidents to directors. Except for those from few industries like medicine, a lot of senior executives are faced with the possibility of getting dismissed from the job.

Sales declines are just the beginning, as the shadow of worse scenario looms large in many industries, especially in automotive and real estate sectors.

After a short boom at the beginning of 2008, China’s automotive market took a dive all the way through the entire year, and failed to meet the production and sales goal of 10 million units set for the year before. Thus personnel changes took place more frequently in 2008 than previous years. Over half automotive companies replaced their senior management last year. For example, Chery’s general manager Li Feng left for Beiqi last August due to sales slowdown; In October, Liu Yuehai was promoted to vice president of GM’s Asian and Pacific regional market, entrusted with the mission to save GM; Kenneth Hsu of Ford China was transferred back to Ford headquarters in November; Joern Hasenfuss was appointed vice president of Shanghai-Volkswagen in December last year.

More senior management reshuffles might take place in 2009. Senior executives’ salaries might be even lower, yet it remains unknown until 2009 annual reports come out. 

Rewritten by Louise Liu based on author’s

article published in Automotive Observer

 

<Table 2>

Top 20 senior executives of listed domestic companies in 2007

Company                            Chairman                   Annual salary (¥1 million)

Ping An Insurance               Ma Mingzhe                66.16

Shenzhen Development Bank                                 Frank Newman       22.15

Minsheng Bank                    Dong Wenbiao            17.49

Vanke (SHE: 000002)          Wang Shi                    6.91

Goldwind Sci & Tech         Wu Gang                    6.78

Midea                                  He Xiangjian               4.85

Youngor                              Li Rucheng                 3.85

China COSCO                     Wei Jiafu                    3.61

Gem-Year Industrial           Cai Yonglong              3.33

Industrial Bank                    Gao Jianping               2.98

Pacific Insurance                 Gao Guofu                 2.95

Bank of Beijing                   Yan Bingzhu               2.69

Haitong Securities                Wang Kaiguo              2.54

CITIC Securities                  Wang Dongming         2.45

TCL                                    Li Dongsheng             2.44

China World Trade Center   Hong Jingnan              2.39

Yantai Wanhua Polyurethane                                 Ding Jiansheng 2.37

Gemdale Corporation          Ling Ke                       2.31

Northeast Securities             Yang Shucai               2.27

China Life Insurance           Yang Chao                  1.99

Interlink: salaries of senior executives of overseas automakers

1. Porsche posted pre-tax profit of $11.6 billion for fiscal year 2008 and was considered one of the most profitable automakers amid the financial crisis. Porsche CEO Wendelin Wiedeking’s 2008 income hit $100 million, 7.5 percent higher than the $93 million salary he received in 2007.

2. Daimler’s sales slump took its toll on senior executives’ incomes in 2008. Daimler chairman Dieter Zetsche, along with other six board members, had annual salaries axed last year. Zetsche received €5 million in 2008 while his 2007 salary was as high as €10.2 million. Bonuses received by other six board members shrank from €14.8 million in 2007 to €1.5 million in 2008.

3. Toyota’s sales data showed that the Japanese giant’s 2008 sales decreased by 4 percent to 8.972 million units, and its revenues were down by 50 percent. Shoju Nozaki, executive vice president of Toyota China said his annual salary was cut by 10 percent in spite of the 17 percent growth of Toyota in China last year.

4. After forcing hourly workers to make further compromises, Ford will continue to slash salaries of its senior executives in 2009. Ford senior executives stated that they would accept a salary cut of 30 percent in the next two years in a memorandum from company executive chairman William Ford Jr. and CEO Alan Mulally.

5. General Motors announced on March 5 that its CEO Rick Wagoner’s annual salary was reduced to $5.4 million in 2008 from $14.1 million in 2007. According to the documents GM submitted, Wagoner received a salary of $2.1 million without bonus in 2008. GM lost $30.9 billion last year, the second largest loss in the automaker’s 100 years history.

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