The Chinese government has unveiled a new policy on executive pay for state-owned or controlled companies. It's the latest effort to address public concern over huge pay packages at these companies.

The regulation is expected to go into effect in July or August. Executive pay will consist of three parts. Base pay will be calculated according to the regional average SOE employee salary, and multiplied by a factor determined by the scale of the enterprise and other considerations. The second part, performance pay, is limited to 3 times the basic pay. A mid- and long-term incentive bonus will be given only when senior managers achieve certain development targets.

The regulation will only apply to state-owned or controlled enterprises, like PetroChina.

Ironically, Ping An Insurance, which is at the center of the debate over excessive executive pay, is exempt from the regulation. The government doesn't have a majority stake.

Back in April, the Ministry of Finance drafted a salary management circular for executives at State sector enterprises. The annual salary would be limited to 2.8 million yuan. The caps of pay packages for executives are four times their annual salary.

The latest regulation spells out the details. Once it goes into effect, executive pay has to be brought in line.

(CCTV June 23, 2009)