Bonus checks

Jiang: he must do it for the love

Jiang Jianqing, the chairman of ICBC, sits at the high-table of global bankers. But the man behind the world’s largest bank took home just Rmb1.6 million ($236,000) in 2008 – a fraction of what his peers on Wall Street earn. And as the Caixin website reported this week, the Bank of China cuts its senior managers pay by 45% last year.

So when it comes to compensating its bankers, China might seem more restrained than the US and the UK. But the issue of compensation in the finance community is still a hot topic. Most of the country’s leading banks and insurance companies are state-owned, which means that their top executives are selected by the Communist Party.

With this in mind, the banking regulator recently issued guidelines governing banker bonuses, with the aim of discouraging excessive risk- taking. The new rules stipulate that for senior managers, a bonus should be no more than three times base pay; while for rank-and-file employees, bonuses cannot be more than 35% of base salary. The banks will also defer at least 40% of bonuses for a period of at least three years.

Since Jiang’s base salary accounted for more than half his total compensation, it is unlikely that he will be affected by the new rules, but it could cause problems for firms when they try to attract bankers more used to international pay standards.

Take Lee Zhang, Deutsche Bank’s regional head of global banking. Bloomberg reported this week that the German bank’s star player in Asia is in talks to join ICBC. Zhang already has close connections with ICBC – his team had an advising role in the bank’s IPO in 2006 – and if he does move, he will be the most senior investment banker to jump from a Western bank to a Chinese state-owned rival.

It seems likely, however, that he would have to take a pay-cut, since his current compensation is almost certainly higher than that of his potential future boss, Jiang Jianqing. But as a company close to the government, ICBC might be able to offer other incentives to Zhang, such as a boost to his political career. This might be attractive to Zhang as he already holds some official positions: he’s a member of an advisory body to the nation’s legislature, as well as financial advisor to Beijing.

Chinese financial institutions have tried to capitalise on the turmoil in the global economy to bring Chinese bankers working on Wall Street and in London back home. To this end, a number of recruitment roadshows have been held in cities such as London, New York and Chicago. In one event held in New York, Chinese financial professionals, used to earning between $500,000 and $1 million, waited in line for an hour to get a few minutes of face time. They were told about jobs in China that would pay in the range of Rmb1.5 million ($219,600).

That makes many question whether Chinese bankers can really be drawn back home on the cheap: “In some cases, the domestic firms were marginally successful at getting people,” Alistair Ramsbottom, a Shanghai-based headhunter, told FinanceAsia in February. “But ambitious candidates still generally want to work for an international firm in China because the local companies haven’t been able to pay as much as their foreign rivals.”

One notable exception is CICC. China’s investment banking champion has succeeded in poaching top bankers from rivals, such as Goldman Sachs and Merrill Lynch – thanks, in part, to offering internationally competitive salaries. It is targeting 200 hires from foreign firms by year end. An insider says it initially found it easier to lure talent through its Hong Kong branch, but now hires are being made directly in Beijing. Luckily, it remains unaffected by the regulations on bonuses – which so far apply only to China’s commercial banks.

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