A Study on the Compensation Gap among Executives at Chinese Enterprises*

Based on data for 2005 to 2012, an analysis of the compensation gap between top executives at different Chinese listed companies reveals the following conclusions. (1) The large compensation gap existing among executives at listed Chinese companies—in some years even larger than that between rank-and-file employees—is mainly caused by the exorbitant executive compensation at a minority of companies. (2) Between 2005 and 2012, the compensation gap first widened dramatically and then diminished gradually. The leading factor in this fluctuation was the drastic rise and fall in the level of executive compensation at a handful of financial enterprises. The main reason for the narrowing of the compensation gap is central government regulation, which has helped to curb the excessive growth of executive compensation in society as a whole. (3) Even in the same round of fluctuation, state-owned listed companies differ markedly from non-state-owned listed companies in the way their executive compensation is decided. (4) State-owned listed companies’ executive compensation strategies and their internal governance structure have not played their due role in moderating the overly rapid growth of their executives’ compensation or in reducing the compensation gap.