WHEN MONEY ISN’T ENOUGH
Many CFOs in China aspire to join an FIE. So why does our survey say that those who work in one are not exactly happy?
By Lily Zhang

For the romantics in China, working for a foreign enterprise appears to offer the thrill of being part of a big company, the chance of gaining best-practice knowledge and skills, and the possibility of external postings. The money is nothing to sneeze at either. In this year’s annual compensation survey of CFO China, CFO Asia’s sister publication, the finance executives of wholly-owned foreign enterprises (WOFEs) were found to be the highest paid in China, with pay packets more than a third fatter than the average compensation of all respondents.

But the same survey also reveals a startlingly high degree of dissatisfaction among them. More than half of CFOs in WOFEs and joint ventures – which together make up the category foreign invested enterprises (FIEs) – say they want more money, compared with just 33% of their counterparts in private-sector firms. More than 20% of CFOs in FIEs have also changed jobs in the past 12 months, far higher than 6% among those working in private enterprises and 7% in state-owned enterprises. And nearly 40% intend to change jobs in the next 12 months.

What’s going on? There are many attempts at an answer, from the lack of access to top management in an FIE to having little real power or demanding bosses. Wayne Zhong, head of finance and accounting of Volvo Construction Equipment, a maker of engineering machinery, refers to a comment by Jack Welch, the former chief of GE, that GE’s compensation packages may be large, but it also has low labor costs. “What he meant was that GE paid the highest salaries, but demanded the highest efficiency, thus minimizing labor costs per unit,” says Zhong. “This is a key character of FIEs. They don’t care about fairness and work-life balance. They want efficiency and profits. Their so-called people orientation is actually people’s efficiency orientation.”

Emerging snapshot

This finding further develops the emerging picture of finance-department compensation that CFO China has been taking annually. This year, our survey received 270 responses, from 128 CFOs, VPs of finance or controllers, and 88 internal-control directors, managers of finance departments and treasuries, or chiefs of internal audit. Of the CFOs, VPs of finance and controllers surveyed, 28% came from wholly-owned foreign enterprises (WOFEs), 20% from joint ventures and cooperative ventures, 29% from private enterprises and 24% from SOEs.

The CFO China survey shows that CFOs, VPs of finance, or controllers with wholly-owned foreign enterprises enjoy the highest total compensation, including fixed and variable cash compensation as well as non-cash compensation, at 553,000 renminbi (US$68,840) on average. Their peers in joint ventures come second, with average compensation of 409,000 renminbi. Privately-owned enterprises offer the third best compensation at an average of 254,000 renminbi. Compensation in state-owned enterprises (SOEs) is at the bottom – 237,000 renminbi on average.

Aileen Zhong, controller of Cooper (China), a global manufacturer of electronic products, is not surprised. “FIEs come to China without much knowledge of the local situation, so they tend to pay a higher salary for experienced management teams to kick off their businesses,” she says. Zhang Yiming, vice president of R&J Management Consulting, observes that CFO compensation at private businesses is not as high because they do not yet have a proper organizational structure and tend to regard CFOs as “bean counters only.” Adds Jiao Wenjun, CFO of Tianjin-based Tiens Biotech and chief accountant at privately-owned Tiens Group: “Chinese private businesses are just setting out, so their compensation level is naturally lower.”

For all the disparity, nearly 60% of CFOs, VPs of finance or controllers in the survey say they are “very satisfied” or “basically satisfied” with their current compensation package. Of the 14% who changed jobs in the past 12 months, six of ten saw their salary rise 20% to 30%, with a tenth getting over 40%. More than 30% plan to change jobs in the next 12 months: 36% of those hope for a 30% to 40% salary rise when they move; and another 36% anticipate a rise above 40%.

Fie on FIEs

So why are CFOs at foreign firms more dissatisfied? Jiao, who has turned down a fat offer from a Fortune 500 company, hazards a guess. “Although many FIEs are big in China, they are merely subsidiaries,” he says. “In my company, I report directly to the number-one guy, unlike FIE CFOs, who might report to the number five or six. We are a private business listed overseas. I’m in headquarters and my telephone number has to be reported to the US SEC. Our CFOs in Europe and America are locals, and they report to me. I have decision power and I’m the CEO’s strategic partner.”

Peter Zhuo chose to move to private company Pansky Technology Group from his post as controller at Morgan Stanley (China). “An individual cannot maximize his or her value in an FIE,” he says. “China is only a part of global financial management there, so CFOs won’t have strategic management responsibilities.” And, adds Jiao, “FIEs are process-oriented. There are rules to follow for everything and so there is limited room for you to play. There are glass ceilings that prevent you from moving up, simply because you are not a foreigner.”

Jiao says one reason he turned down the offer from the Fortune 500 company was the job’s instability. “There are many mergers and acquisitions with FIEs with the attendant regime change,” he notes. And FIEs do not mix business with personal relationships. “In large private enterprises,” says Jiao, “you build up the business for your boss and people remember that. If you leave because of health problems, for example, your boss will make a good arrangement for your later life. That’s impossible with FIEs.”

If true, the higher compensation on offer to CFOs and the romantic perceptions about opportunities there may be the only things going for FIEs. How much longer are they willing to jack up salaries as local Chinese enterprises gain the wherewithal to offer attractive compensation packages of their own? Can foreign firms change working conditions, personal attitudes, and promotion policies enough to retain the people they now have? Tune in again as CFO China reports the results of its future surveys.