An increasing number of law firms are reaping good returns from the thriving business relationship developing between China and Australia.
China Everbright Limited (CEL) has ventured Down Under, building two funds with Australia’s Macquarie Bank to leverage China’s infrastructure opportunities. Mallesons and CEL’s ongoing legal advisor, Paul Hastings, both have a hand in the joint venture.
Australian and Hong Kong partners, John Sullivan and Hayden Flinn, are leading Mallesons representation for Macquarie Bank. Paul Hastings’s Hong Kong-based corporate partner Raymond Li, partner Vivian Lam and Jenny Law are acting for CEL. The joint venture will raise US$1.5bn to create two funds for Chinese infrastructure investments.
Showing posts with label china. Show all posts
Showing posts with label china. Show all posts
November 3, 2010
July 22, 2010
Arrested Rio Tinto employees find legal representation
Four Rio Tinto employees who stand accused by the government of bribery and industrial espionage have been granted legal representation. While the four will have individual lawyers they will all be tried collectively, and they have all chosen renowned PRC lawyers.
Australian citizen Stern Hu, general manager of the Rio Tinto sales team in Shanghai, is represented by Charles Duan, the managing partner of Shanghai-based Duan & Duan. Three Chinese nationals, Liu Caikui, Ge Minqiang and Wang Yong, have engaged legal representation through Shanghai-based criminal lawyers. Liu, who was the manager of the Rio sales team, will be represented by Tao Wuping from Shenda Partners, who has previously acted for Shanghai property tycoon Zhou Zhengyi in the stock manipulation case in 2003.
Criminal defence lawyer Zhai Jian, who founded Zhai Jian law firm and gained national fame for defending a Beijing resident who killed six police officers last July, will defend Ge, an employee of the company. Zhang Peihong, also from Zhai Jian, will act for Wang, also an employee.
“There is no reason for me to not accept this case. It’s like operating a hospital – you can’t turn away patients,” said Zhai. “[It] has been receiving an overload of media attention, but I am not pressured and will try it as any other litigation case.”
China announced the formal arrest of the Rio employees on 12 August 2009; and their lawyers have filed for permission to see their clients. Chinese law does not require the defendants to have access to their lawyers until after the current stage of investigation.
“At this stage, all lawyers still do not know the detailed facts of the case and [I] am unable to comment further,” Zhai added. Although the four Rio employees were detained weeks ago the allegations against them have now been amended: from stealing state secrets, which is punishable by execution, to bribery and theft of commercial secrets.
The accused face up to seven years imprisonment if found guilty. The matter has affected tensions somewhat between China and Australia, as the “Rio Four” case has been mentioned when Australian firms report their major transaction and investments dealings from China.
The recent arrests have also kept China-based Western companies on their toes. Many companies are seeking legal advice on how to prevent similar accusations happening to their employees. The case also questions the boundaries of acceptable commercial behaviour in China and the cost of overstepping the line.
Australian citizen Stern Hu, general manager of the Rio Tinto sales team in Shanghai, is represented by Charles Duan, the managing partner of Shanghai-based Duan & Duan. Three Chinese nationals, Liu Caikui, Ge Minqiang and Wang Yong, have engaged legal representation through Shanghai-based criminal lawyers. Liu, who was the manager of the Rio sales team, will be represented by Tao Wuping from Shenda Partners, who has previously acted for Shanghai property tycoon Zhou Zhengyi in the stock manipulation case in 2003.
Criminal defence lawyer Zhai Jian, who founded Zhai Jian law firm and gained national fame for defending a Beijing resident who killed six police officers last July, will defend Ge, an employee of the company. Zhang Peihong, also from Zhai Jian, will act for Wang, also an employee.
“There is no reason for me to not accept this case. It’s like operating a hospital – you can’t turn away patients,” said Zhai. “[It] has been receiving an overload of media attention, but I am not pressured and will try it as any other litigation case.”
China announced the formal arrest of the Rio employees on 12 August 2009; and their lawyers have filed for permission to see their clients. Chinese law does not require the defendants to have access to their lawyers until after the current stage of investigation.
“At this stage, all lawyers still do not know the detailed facts of the case and [I] am unable to comment further,” Zhai added. Although the four Rio employees were detained weeks ago the allegations against them have now been amended: from stealing state secrets, which is punishable by execution, to bribery and theft of commercial secrets.
The accused face up to seven years imprisonment if found guilty. The matter has affected tensions somewhat between China and Australia, as the “Rio Four” case has been mentioned when Australian firms report their major transaction and investments dealings from China.
The recent arrests have also kept China-based Western companies on their toes. Many companies are seeking legal advice on how to prevent similar accusations happening to their employees. The case also questions the boundaries of acceptable commercial behaviour in China and the cost of overstepping the line.
May 25, 2010
China. Paul Weiss
Amended Telecoms Permit Regulations Reduce Market Entry Requirements but Increase Responsibilities for Basic Telecommunications Services Operators.
On March 1, 2009, China’s Ministry of Information and Industry Technology (“MIIT”) issued the amended Measures on the Administration of Telecommunications Business Operating Permits (the “Amended Measures”). The Amended Measures entered into effect on April 1, 2009, and replaced the original Measures issued on December 2, 2001 (the “2001 Measures”).
The 2001 Measures detailed the requirements to engage in telecommunications services (“TS”) in China and were one of the first regulations issued by the Chinese government after China acceded to the World Trade Organization (“WTO”). The Amended Measures reflect the Chinese government’s experience in administering the TS industry for the past eight years and commitment to lowering market entry thresholds for basic telecommunications services (“BTS”) providers and protecting consumers.
PRC telecommunications services are divided into two major categories: BTS and value-added telecommunications services (“VATS”). The Amended Measures lower the capital requirement for operating BTS locally from RMB200 million to RMB100 million and for operating BTS nationally from RMB2 billion to RMB1 billion. The capital requirements under the 2001 Measures have long been viewed as unreasonably high and a barrier to entry for the BTS industry. The reduction in capital requirement will promote greater investment and competition in the BTS industry. In addition, the capital requirements for operating BTS under the Amended Measures are now consistent with those under the 2008 amended Regulations for the Administration of Foreign-Invested Telecommunications Enterprises (the “FITE Regulations”). Currently, despite China’s commitment to open up the BTS industry pursuant to China’s accession to the WTO, MIIT does not accept applications from foreign investors to engage in BTS in China, and this could partly be due to the inconsistency between the capital requirements under the Measures and the FITE Regulations. Once the Amended Measures enter into effect, MIIT might start accepting applications from foreign investors for BTS permits.
Under the Amended Measures, a BTS operator is required to supervise and manage the content and fees for the services provided by the VATS operators which cooperate with, or engage the services of, such BTS operator and to establish a system to monitor VATS operators’ conduct. In the Chinese TS industry, it is common for BTS operators to operate the infrastructure (e.g., network) on which the VATS operators provide their services. Hence, a VATS operator generally needs to cooperate with, or engage the services of, a BTS operator. During the past few years, the number of VATS operators increased dramatically, and many VATS operators resorted to business practices that are harmful to consumers in order to survive in this highly competitive industry. This resulted in wide-spread consumer dissatisfaction in China. In the past, MIIT was the official regulator of VATS operators, with BTS operators generally only supporting MIIT’s efforts unofficially and verifying whether the relevant VATS operators using its services are properly licensed. With the Amended Measures, MIIT would officially be shifting some of the burden of monitoring VATS operators to BTS operators, who are closer to the VATS operators.
Even though the Amended Measures do not introduce major changes, they should satisfy both proponents of relaxing entry barriers for BTS and proponents of consumer protection.
On March 1, 2009, China’s Ministry of Information and Industry Technology (“MIIT”) issued the amended Measures on the Administration of Telecommunications Business Operating Permits (the “Amended Measures”). The Amended Measures entered into effect on April 1, 2009, and replaced the original Measures issued on December 2, 2001 (the “2001 Measures”).
The 2001 Measures detailed the requirements to engage in telecommunications services (“TS”) in China and were one of the first regulations issued by the Chinese government after China acceded to the World Trade Organization (“WTO”). The Amended Measures reflect the Chinese government’s experience in administering the TS industry for the past eight years and commitment to lowering market entry thresholds for basic telecommunications services (“BTS”) providers and protecting consumers.
PRC telecommunications services are divided into two major categories: BTS and value-added telecommunications services (“VATS”). The Amended Measures lower the capital requirement for operating BTS locally from RMB200 million to RMB100 million and for operating BTS nationally from RMB2 billion to RMB1 billion. The capital requirements under the 2001 Measures have long been viewed as unreasonably high and a barrier to entry for the BTS industry. The reduction in capital requirement will promote greater investment and competition in the BTS industry. In addition, the capital requirements for operating BTS under the Amended Measures are now consistent with those under the 2008 amended Regulations for the Administration of Foreign-Invested Telecommunications Enterprises (the “FITE Regulations”). Currently, despite China’s commitment to open up the BTS industry pursuant to China’s accession to the WTO, MIIT does not accept applications from foreign investors to engage in BTS in China, and this could partly be due to the inconsistency between the capital requirements under the Measures and the FITE Regulations. Once the Amended Measures enter into effect, MIIT might start accepting applications from foreign investors for BTS permits.
Under the Amended Measures, a BTS operator is required to supervise and manage the content and fees for the services provided by the VATS operators which cooperate with, or engage the services of, such BTS operator and to establish a system to monitor VATS operators’ conduct. In the Chinese TS industry, it is common for BTS operators to operate the infrastructure (e.g., network) on which the VATS operators provide their services. Hence, a VATS operator generally needs to cooperate with, or engage the services of, a BTS operator. During the past few years, the number of VATS operators increased dramatically, and many VATS operators resorted to business practices that are harmful to consumers in order to survive in this highly competitive industry. This resulted in wide-spread consumer dissatisfaction in China. In the past, MIIT was the official regulator of VATS operators, with BTS operators generally only supporting MIIT’s efforts unofficially and verifying whether the relevant VATS operators using its services are properly licensed. With the Amended Measures, MIIT would officially be shifting some of the burden of monitoring VATS operators to BTS operators, who are closer to the VATS operators.
Even though the Amended Measures do not introduce major changes, they should satisfy both proponents of relaxing entry barriers for BTS and proponents of consumer protection.
May 22, 2010
Fulbright promotes two partners in Hong Kong
Fulbright & Jaworski has elevated nine senior associates and four senior counsel from core practice areas to join the firm’s global partnership.
Two of the new partners are based in Hong Kong, Zhang Jie of the corporate group and Ben McQuhae of the energy & real estate group.
Both have experience in advising multinational clients in oil & gas-related transactions and projects. However, Zhang handles M&A transactions, joint ventures, cross-border investments and structured finance, primarily involving the People’s Republic of China, while McQuhae’s practice has a clear focus on oil & gas, coal and other energy-related transactions in Asia.
Two of the new partners are based in Hong Kong, Zhang Jie of the corporate group and Ben McQuhae of the energy & real estate group.
Both have experience in advising multinational clients in oil & gas-related transactions and projects. However, Zhang handles M&A transactions, joint ventures, cross-border investments and structured finance, primarily involving the People’s Republic of China, while McQuhae’s practice has a clear focus on oil & gas, coal and other energy-related transactions in Asia.
Galaxy GC joins Proskauer Rose in Hong Kong
Proskauer Rose has announced that Jim Chapman will join the firm as a partner in its lodging and gaming practice group.
Before joining Proskauer, Chapman was the general counsel of Galaxy Entertainment Group, one of Asia’s leading gaming and entertainment companies. Chapman has been involved in some of the most high-profile gaming, hotel and resort development transactions in the region, including the 44-hectare mixed-use Galaxy Macau project currently underway in Cotai, Macau. Chapman was also previously a partner at JSM.
The addition of Chapman will mean the firm now has four partners (including office managing partner Yuval Tal) and one associate (Sara Shen) on the ground in Hong Kong.
Before joining Proskauer, Chapman was the general counsel of Galaxy Entertainment Group, one of Asia’s leading gaming and entertainment companies. Chapman has been involved in some of the most high-profile gaming, hotel and resort development transactions in the region, including the 44-hectare mixed-use Galaxy Macau project currently underway in Cotai, Macau. Chapman was also previously a partner at JSM.
The addition of Chapman will mean the firm now has four partners (including office managing partner Yuval Tal) and one associate (Sara Shen) on the ground in Hong Kong.
May 15, 2010
New exchange set up to aid Chinese trading
China’s growing appetite for energy and resources has led to the set up of the Hong Kong Mercantile Exchange (HKMEx) to bridge the gap between the international commodities markets and China.
It provides an efficient and transparent pricing platform for end-users and the global trading community to trade tailor-made contracts, hedge pricing risks in China and across the region, lower transactions costs and increase participation by Chinese and international commodities traders.
To ensure its smooth and efficient operation, and the implementation of its future growth strategy, the new exchange has appointed Ann Cresce as general counsel and head of compliance.
“Ann’s appointment adds more depth to our team as we continue building Hong Kong’s commodities exchange,” said HKMEx chairman Barry Cheung. “Compliance is a critical element to ensure the integrity of the exchange and we are extremely pleased to have someone of Ann’s calibre join us.”
Cresce is responsible for managing all legal and regulatory functions for HKMEx. She joined from the Chicago Climate Exchange, where she was senior vice president and general counsel, overseeing all legal affairs pertaining to domestic and foreign business development, corporate matters, regulatory issues, intellectual property, and human resource issues.
“Nothing better anticipates the future in the exchange industry than the establishment of a commodities marketplace in Hong Kong. I am very excited about the prospects for HKMEx,” Cresce said.
It provides an efficient and transparent pricing platform for end-users and the global trading community to trade tailor-made contracts, hedge pricing risks in China and across the region, lower transactions costs and increase participation by Chinese and international commodities traders.
To ensure its smooth and efficient operation, and the implementation of its future growth strategy, the new exchange has appointed Ann Cresce as general counsel and head of compliance.
“Ann’s appointment adds more depth to our team as we continue building Hong Kong’s commodities exchange,” said HKMEx chairman Barry Cheung. “Compliance is a critical element to ensure the integrity of the exchange and we are extremely pleased to have someone of Ann’s calibre join us.”
Cresce is responsible for managing all legal and regulatory functions for HKMEx. She joined from the Chicago Climate Exchange, where she was senior vice president and general counsel, overseeing all legal affairs pertaining to domestic and foreign business development, corporate matters, regulatory issues, intellectual property, and human resource issues.
“Nothing better anticipates the future in the exchange industry than the establishment of a commodities marketplace in Hong Kong. I am very excited about the prospects for HKMEx,” Cresce said.
May 3, 2010
China Chengtong appoints new general counsel
China Chengtong Group, a large logistics conglomerate, has announced the appointment of Wang Yonghai as the general counsel of China Asset Management Corporation (CAMC) – an important wholly owned subsidiary of the group.
Wang will remain a vice-president of CAMC while he serves as general counsel. With 17 years’ experience, both in-house and in private practice, he is responsible for all the legal affairs of the company, which manages more than RMB10bn in assets, and reports directly to the president. A dedicated legal affairs department has also been set up.
Dacheng partner Tuo Mingzhong, the company's long-term external counsel who has been on a retainer basis since 2000, will continue to provide legal support and advice.
As part of Chengtong Group’s plans to improve its legal risk management and corporate governance, it aims to appoint general counsel for another four important subsidiaries by 2010. The group's general counsel, Tang Mingyi, was appointed in early 2008 through public recruitment of senior executives for the central SOEs, which was organised by the State Assets Supervision and Administration Commission of the State Council.
Before joining Chengtong Group, Tang served as the manager of the law and regulatory department at the Civil Aviation Administration of China.
Wang will remain a vice-president of CAMC while he serves as general counsel. With 17 years’ experience, both in-house and in private practice, he is responsible for all the legal affairs of the company, which manages more than RMB10bn in assets, and reports directly to the president. A dedicated legal affairs department has also been set up.
Dacheng partner Tuo Mingzhong, the company's long-term external counsel who has been on a retainer basis since 2000, will continue to provide legal support and advice.
As part of Chengtong Group’s plans to improve its legal risk management and corporate governance, it aims to appoint general counsel for another four important subsidiaries by 2010. The group's general counsel, Tang Mingyi, was appointed in early 2008 through public recruitment of senior executives for the central SOEs, which was organised by the State Assets Supervision and Administration Commission of the State Council.
Before joining Chengtong Group, Tang served as the manager of the law and regulatory department at the Civil Aviation Administration of China.
March 11, 2010
Hong Kong singled out as DLA Piper axes 54
DLA Piper is restructuring its Asia offices in a move which will see 20 of its Asia-based lawyers made redundant by the end of March.
The firm announced that 54 staff members – 20 fee earners and 34 support staff – across its Asia businesses will be cut. Most of the losses are believed to affect the Hong Kong office, in the aftermath of several partner departures. Managing partner Alastair Da Costa described the cuts as “strategically and commercially responsible”.
A leaked memo allegedly provided an outline of the firm’s culling strategy detailing criteria including strength in maintaining client relationships, initiative shown in external practices and the amount of leave take will be used when selcecting staff for layoffs.
Staff unhappy with miserly payouts
Support staff at DLA Piper are reportedly less than impressed at the severance packages on offer.
Those who take voluntary redundancies will be paid out for their contractual notice period, one month’s salary and only the statutory minimum compensation. This pales in comparison with the packages being offered by international rivals Clifford Chance, Linklaters and Allen & Overy.
The firm announced that 54 staff members – 20 fee earners and 34 support staff – across its Asia businesses will be cut. Most of the losses are believed to affect the Hong Kong office, in the aftermath of several partner departures. Managing partner Alastair Da Costa described the cuts as “strategically and commercially responsible”.
A leaked memo allegedly provided an outline of the firm’s culling strategy detailing criteria including strength in maintaining client relationships, initiative shown in external practices and the amount of leave take will be used when selcecting staff for layoffs.
Staff unhappy with miserly payouts
Support staff at DLA Piper are reportedly less than impressed at the severance packages on offer.
Those who take voluntary redundancies will be paid out for their contractual notice period, one month’s salary and only the statutory minimum compensation. This pales in comparison with the packages being offered by international rivals Clifford Chance, Linklaters and Allen & Overy.
March 8, 2010
In-house team importance grows
Continued efforts to implement a ‘general counsel system’ in state-owned enterprises in China sends a positive message to law firms and encourages greater communication with decision-makers.
Six years after the Chinese Government initiated a campaign to implement a “general counsel system” in state-owned enterprises (SOEs), the majority of the large SOEs have now established an in-house legal function and appointed general counsel.
Many of these in-house departments have thrived and proven their value to senior management in a remarkably short space of time. Legal managers and general counsel in these departments have also earned good reputations in the legal community. The in-house legal teams of CNOOC, Bao Steel and Sinopec, for example, have excelled in providing strategic and innovative legal solutions to enable their companies to achieve business and strategic objectives not only in the domestic market, but also in key markets around the globe.
As part of the campaign, and in an effort to find the most competent candidates for general counsel positions, the State Assets Supervision and Administration Commission of the State Council (SASAC) started an annual public recruitment program to help appoint general counsel for enterprises under its supervision since 2006. So far, 16 central-level SOEs have appointed general counsel through three public recruitment programs.
Last May, a plan to promote general counsel roles in subsidiary companies announced by SASAC marked the beginning of the campaign’s second phase. The plan says all important subsidiaries of the central-level SOEs should have appointed general counsel and set up an in-house legal function by 2010.
China Chengtong Group, a large logistics conglomerate which is a central SOE, is one of the first to respond to the new agenda set by the SASAC. Under the leadership of the group’s general counsel, Tang Mingyi, who was appointed through SASAC’s 2007 public recruitment program, the group recently named Wang Yonghai as the general counsel of its important subsidiary, China Asset Management Corporation.
As the SOEs are becoming increasingly commercially oriented, international and market-driven, the development of a solid in-house legal function is a good strategy. However, this raises an important question: does the growth of the inhouse role translate into reduced business opportunities for external firms?
According to Dacheng’s senior partner, Tuo Zhongming, the promotion of in-house legal teams in SOEs will improve the legal service industry. “We see the rise of in-house teams led by a general counsel as a positive and necessary development. As large sophisticated organisations, they do need professional legal management,” he says.
Tuo has extensive experience working with SOEs, particularly on restructuring projects. He has been the main outside advisor for China Asset Management Corporation since 2000. After the appointment of the general counsel, he continues to provide legal support and advice regarding the company’s business operations and strategic planning.
“General counsel and in-house counsel don’t handle all legal matters directly; they are responsible for leading and managing the process,” Tuo says. “The volume of legal work outsourced to us won’t be lower than before the general counsel was named, but we have to offer more specialised legal services in certain practice areas and improve the quality of our services.”
In the past, due to the absence of an in-house legal team, communication between external counsel and board members and senior management has been problematic and prone to misunderstandings. Having an in-house legal team will help external counsel work more efficiently.
“In-house teams can help law firms to better understand companies’ business needs, and at the same time they can ensure that external advisers are able to provide the best value and legal solutions for businesses,” says Liu Yuming, a partner of Zhong Lun.
Six years after the Chinese Government initiated a campaign to implement a “general counsel system” in state-owned enterprises (SOEs), the majority of the large SOEs have now established an in-house legal function and appointed general counsel.
Many of these in-house departments have thrived and proven their value to senior management in a remarkably short space of time. Legal managers and general counsel in these departments have also earned good reputations in the legal community. The in-house legal teams of CNOOC, Bao Steel and Sinopec, for example, have excelled in providing strategic and innovative legal solutions to enable their companies to achieve business and strategic objectives not only in the domestic market, but also in key markets around the globe.
As part of the campaign, and in an effort to find the most competent candidates for general counsel positions, the State Assets Supervision and Administration Commission of the State Council (SASAC) started an annual public recruitment program to help appoint general counsel for enterprises under its supervision since 2006. So far, 16 central-level SOEs have appointed general counsel through three public recruitment programs.
Last May, a plan to promote general counsel roles in subsidiary companies announced by SASAC marked the beginning of the campaign’s second phase. The plan says all important subsidiaries of the central-level SOEs should have appointed general counsel and set up an in-house legal function by 2010.
China Chengtong Group, a large logistics conglomerate which is a central SOE, is one of the first to respond to the new agenda set by the SASAC. Under the leadership of the group’s general counsel, Tang Mingyi, who was appointed through SASAC’s 2007 public recruitment program, the group recently named Wang Yonghai as the general counsel of its important subsidiary, China Asset Management Corporation.
As the SOEs are becoming increasingly commercially oriented, international and market-driven, the development of a solid in-house legal function is a good strategy. However, this raises an important question: does the growth of the inhouse role translate into reduced business opportunities for external firms?
According to Dacheng’s senior partner, Tuo Zhongming, the promotion of in-house legal teams in SOEs will improve the legal service industry. “We see the rise of in-house teams led by a general counsel as a positive and necessary development. As large sophisticated organisations, they do need professional legal management,” he says.Tuo has extensive experience working with SOEs, particularly on restructuring projects. He has been the main outside advisor for China Asset Management Corporation since 2000. After the appointment of the general counsel, he continues to provide legal support and advice regarding the company’s business operations and strategic planning.
“General counsel and in-house counsel don’t handle all legal matters directly; they are responsible for leading and managing the process,” Tuo says. “The volume of legal work outsourced to us won’t be lower than before the general counsel was named, but we have to offer more specialised legal services in certain practice areas and improve the quality of our services.”
In the past, due to the absence of an in-house legal team, communication between external counsel and board members and senior management has been problematic and prone to misunderstandings. Having an in-house legal team will help external counsel work more efficiently.
“In-house teams can help law firms to better understand companies’ business needs, and at the same time they can ensure that external advisers are able to provide the best value and legal solutions for businesses,” says Liu Yuming, a partner of Zhong Lun.
Proposed reforms to executive remuneration
The fallout from the global financial crisis has resulted in increased interest in executive remuneration across the Asia-Pacific region and beyond.
Developments in the United States have contributed to this interest. The US Senate has been asked to consider a proposal to recover a large proportion of retention bonuses paid to executives of AIG, and other institutions that have received taxpayer assistance, via the introduction of a 70% tax on these payments.
There is a perceived lack of nexus between executive remuneration and performance, and concerns about independence and transparency in setting and paying the remuneration.
There are many reported instances in recent times of companies announcing voluntary reductions in executive salaries, and in some instances, of executives returning bonuses paid to them during the 2008 period. However some governments have proposed reforms to limit the amount companies can offer their executives, causing concern within the business community as to whether companies will be able to offer adequate incentives to attract and retain the best people in an international market for talent.
One example of government intervention is the recent announcement in Australia of proposed reforms to the corporations legislation, aimed at curbing termination payments to executives. These reforms include a proposal to cap termination payments at 1 year’s base salary unless shareholder approval is obtained. The proposed reforms also widen the scope of regulation of termination payments by:
In the People’s Republic of China it has been reported that a draft regulation on executive remuneration is soon to be submitted to the State Council for approval. The draft regulation proposes a pay ceiling of 2.8 million Yuan a year for senior executives of all state-owned enterprises, commencing with the financial sector. Under the proposal, executives may also receive performance-linked pay of no more than three times the basic salary.
Employers should be mindful of developments and how these will affect their ability to attract and retain talent at the executive level.
Developments in the United States have contributed to this interest. The US Senate has been asked to consider a proposal to recover a large proportion of retention bonuses paid to executives of AIG, and other institutions that have received taxpayer assistance, via the introduction of a 70% tax on these payments.
There is a perceived lack of nexus between executive remuneration and performance, and concerns about independence and transparency in setting and paying the remuneration.
There are many reported instances in recent times of companies announcing voluntary reductions in executive salaries, and in some instances, of executives returning bonuses paid to them during the 2008 period. However some governments have proposed reforms to limit the amount companies can offer their executives, causing concern within the business community as to whether companies will be able to offer adequate incentives to attract and retain the best people in an international market for talent.
One example of government intervention is the recent announcement in Australia of proposed reforms to the corporations legislation, aimed at curbing termination payments to executives. These reforms include a proposal to cap termination payments at 1 year’s base salary unless shareholder approval is obtained. The proposed reforms also widen the scope of regulation of termination payments by:
- covering not just current and former directors, but all executives named in the company’s remuneration report;
- broadening the definition of ‘termination payment’ to include all types of payments and rewards given at termination.
In the People’s Republic of China it has been reported that a draft regulation on executive remuneration is soon to be submitted to the State Council for approval. The draft regulation proposes a pay ceiling of 2.8 million Yuan a year for senior executives of all state-owned enterprises, commencing with the financial sector. Under the proposal, executives may also receive performance-linked pay of no more than three times the basic salary.
Employers should be mindful of developments and how these will affect their ability to attract and retain talent at the executive level.
ALB — George Cooper,
Practice Leader Workplace Law & Advisory – Asia Freehills
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