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The Government announced today (June 26) the findings and recommendations of a consultancy study on the remuneration packages of senior executives of selected statutory and other bodies.

The consultant, Hay Group Limited, commissioned in February this year to conduct the study proposes in the report the remuneration levels and mix for the top three tiers of senior executives of the selected bodies as well as recommendations pertaining to mechanisms for remuneration adjustment and disclosure.

The consultancy study initiated by the Administration aims to provide guidelines to individual organisations for them to adjust or refine their remuneration polices and arrangements to ensure that they are in line with market practices.

The findings and recommendations of the study report are made based on the most up-to-date data collected from 80 private companies.

The findings reveal that 70 per cent of the chief executive positions under review have their current remunerations within a range of 15 per cent of the market medians. When the comparison is made with the consultant's proposed remuneration packages, the percentage figure becomes 60 per cent, still presenting a large majority of the chief executive reviewed. Similar findings apply to the second and third tier executives covered in the consultancy study.

On the remuneration mix, the study has underlined the common need for these bodies to consider a more significant performance-based component or a larger variable pay element under their remuneration policy.

The report proposes that each organisation should designate a committee to deal with its remuneration policies and arrangements, to review the performance and remuneration particularly of the chief executives, and to formulate its recommendation to the relevant governing board or approving authority. Each organisation should also track the remuneration levels and trends in the relevant human resource market in accordance with a prescribed and consistent methodology.

The consultant also recommends the bodies under review to follow the disclosure practice of companies listed in the Hong Kong Stock Exchange and in the longer run, as in some overseas countries, a more complete disclosure of the pay packages at the chief executive level. At other levels, these bodies should disclose the aggregate or average remuneration data for the second and third tier executives.

The Government considers the consultant's methodology, analyses and recommendations reasonable and on the right track.

The consultant, after taking into account the qualitative adjustment factors attributable to the senior positions in the bodies under review, has come up with a net downward adjustment of 10 per cent for prestige identified with two chief executive positions. The consultant also recommends a conversion factor of 1.5 to enable governing boards of the concerned bodies the flexibility to derive remuneration levels under different preferred mix to suit the special circumstances of the bodies.

The study recommendations, as indicative rather than prescriptive in nature, will be forwarded to respective governing boards or committees of the bodies for consideration and implementation. The boards are invited to report the outcome of their deliberations to their responsible Director of Bureaux in six months.

Whilst final decision on the remuneration packages of the senior executives will continue to rest with the respective governing boards, with effect from next year, these bodies will be required to disclose to the public the full remuneration packages of their chief executives and the aggregate or average remuneration data for the second and third tier executives. Furthermore, they should report to their responsible Directors of Bureaux annually the remuneration arrangements and adjustments for their top three-tier senior executives, the compliance of their remuneration polices and practices with the established principles under the consultancy study, any deviations with justifications, together with a full list of the comparison companies used to come up with the remuneration packages.

The Administration believes such arrangements strike a proper balance between the need to preserve the independent and effective management of the bodies by the governing boards and public expectation of these bodies to achieve greater transparency and accountability.

End/Wednesday, June 26, 2002

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