An overview of an executive search firm perspective of incentive limitations for bank executives in China.

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One of the biggest challenges for companies in China is to retain talent. The country needs to make sure to provide candidates with an added value in their job proposition to do so. As an executive search firm, we have seen how job satisfaction, career progression, and work-life balance have become more and more important, in addition to remuneration packages.

Based on our experience, we can still see that compensation packages are still of great importance, especially in executive positions. Moreover, in a market where there is high competition for talent, a shortage of generational replacement, and most recently a trend of foreign talent leaving China, it is necessary to carefully design payment policies and laws.

The Chinese Securities Regulatory Commission (CSRC) mentions that as part of President Xi Jinping’s campaign to achieve “common prosperity” in China’s stock market, there are new guidelines directed to the management of remunerations for senior executives at securities firms and fund companies. These measures and rules applied to both local and foreign firms aim to Limit ‘Excessive’ Incentives for Bankers in Pay Curbs.

According to these new guidelines, when deciding the executives’ compensations in China, securities firm must consider:

  • The shareholders’ interests

  • The impact of the market fluctuation

  • The industry’s development

 

Among the guidelines to limit the remuneration of fund houses executives, published by the Asset Management Association of China:

  • Senior managers and department heads should use at least 20% of their annual bonuses to buy their fund houses’ publicly offered funds.

  • At least half of the money should be invested in equity funds unless their companies did not have such products.

  • Fund managers must use at least 30% of their bonuses to buy their fund houses’ publicly offered funds, while the funds they were managing were of higher priority.

 

These regulations rely on the concern in China of a disorderly expansion of capital. Even though China is one of the strongest economies in the world, it does not perform as well in the financial market. As an executive search firm, we question if these measures will affect the fund industry in China and more specifically the capacity of attracting and retaining talent in this sector.

We are Zavala Civitas Executive Search. We have walked alongside our clients, supporting them in matters ranging from Executive Search to broader Organizational Consulting. We are ready to be your talent and Organizational partner in China & East Asia. We are ready to tackle new challenges and risks with your firm.