Executive pay so far rarely on the chopping block even as Hong Kong reels from coronavirus
- Just 15 per cent of Hong Kong companies reported cuts in base salaries of executives
- Most saw pay reduced by between 20 per cent to 30 per cent
A survey of 140 companies in Hong Kong found that just 15 per cent had cut base salaries for executives, and 11 per cent had put in place unpaid leave to cut employment costs, according to Comptify Analytics, which compiled the data for a report in April.
The report, Executive Pay and Cost Containment Measures for Covid-19 in Hong Kong, was released on April 23. The authors said that of the Hong Kong-based executives taking a pay cut, 70 per cent were getting a cut of between 20 per cent to 30 per cent.
Of the companies imposing unpaid leave, 78 per cent said the amount of unpaid leave was 15 per cent of working time.
The industries hardest hit were in logistics and supply chains, where 83 per cent of companies said they had used pay cuts, enforced leave or a combination of measures to contain costs. Companies in lifestyle retail and luxury goods saw 54 per cent similarly affected. The companies most likely not to be resorting to such measures were financial services and insurance, with just 8 per cent of companies reporting doing so.
The Hong Kong government’s Employment Subside Scheme appeared to have impact on companies that were planning on cost cutting measures, with 47 per cent of respondents saying they would “scale down” cost cuts, once the subsidies were in place.
Vincent Fung, managing consultant for Comptify Analytics, said it was a bit surprising that the number of companies cutting executive pay was rather low.
“I believe our perception/illusion is formed by newspapers or hearsay regarding a handful of listed companies announcing their pay cut plan for executives, when in reality the number is still small as compared to more than 2,000 listed companies in Hong Kong.”
Fung added that executive pay cuts so far are more common than during the 2008 global financial crisis because cash flow problems are unprecedented and companies are worried about the risks of a negative perception on social media if cost cutting measures were applied to all levels except top jobs.
In an interview with RTHK on April 9, Secretary for Labour and Welfare, Law Chi-kwong said the government’s plan to pay half of workers’ salaries due to Covid-19 lockdowns could not stop employers from cutting wages, saying the main purpose was to save jobs.
