Chinese Fund Manager Asks Executives to Return Excess Pay

By Julie Zhu and Selena Li
HONG KONG (Reuters) – A leading Chinese fund manager has requested its senior executives to return excess compensation received over the past five years, aligning with a government initiative aimed at promoting economic equality.

Pay Cap Implementation

China Merchants Fund Management (China Merchants FM) has imposed a limit of 3 million yuan ($421,330) on annual pay for each year from 2019 to 2023, according to sources familiar with the situation.

The firm, wholly owned by China Merchants Group (CMG), which is one of China’s largest state-owned conglomerates, is managed by six executives, alongside three managing subsidiaries.

Neither China Merchants FM nor CMG has commented on the matter to Reuters.

Common Prosperity Campaign

Capping salaries and recovering excess pay is part of the government’s “common prosperity” campaign initiated in 2021, aimed to address social and income inequality amidst slower economic growth. This effort discourages lavish lifestyles among financial elites, especially fund managers who have continued to earn high profits despite poor stock market performance.

China Merchants FM has previously asked some portfolio managers to return their earnings surpassing the 3 million yuan cap from the prior year.

Requests for Repayment

The company notified both portfolio managers and senior executives – totaling around 60 individuals – about the repayment in June and began collecting repayments in July. It remains unclear whether China Merchants FM can demand repayments from former employees.

Additionally, Bosera Asset Management, an affiliate of CMG that is 49% owned by the group, has capped pay at 2.9 million yuan and has also asked employees to return excess amounts received last year.

At least two other fund managers have initiated a five-year claw-back policy, with senior management being the primary focus.

Increased Scrutiny

Auditors from the National Audit Office visited China Merchants FM and around a dozen fund managers in the first half of this year, indicating increased scrutiny in the sector. They determined that salaries at some firms were excessively high and recommended implementing pay caps and recovering funds.

The National Audit Office has not provided comments on the situation. According to the 2023 China Salary Guide by headhunter Morgan McKinley, senior executives and department heads at Chinese fund managers earn base salaries ranging from 1.6 million yuan to 6 million yuan.

($1 = 7.1203 Chinese yuan renminbi)