October 1, 2005

China’s overpaid start-up CEOs…

Filed under: Salaries — Administrator @ 2:53 pm

According to a recent survey by VentureSource, CEOs heading up start-up companies in the US make about $10,000 more a year than they did in 2004, and about $35,000 more than in 2003. Overall, the CEOs are earning $260,000 in total salary, bonus and commission compensation, based on an annualized median. I wonder how much revenue these companies are making? Judging from the size of these pay cheques I hope we are talking in the millions.

Anyhow, I thought it would be nice to have our own salary survey, and thus I called over a dozen vc’s in Shanghai/Beijing with China operations and asked them what their start-up’s were paying their top brass. It turned out the median pay cheque (ex-options) rang in at US$60,000 per year.

I’m not sure how to react to this?! Let’s assume only 40 million Chinese households (these guys are considered upper to upper-middle class) earn about US$12,000 per year, that means venture funded start-up CEOs are making 5x the top 3-5% of China’s urban population…that not a bad deal…so what if these China-based CEOs are only making 23% of what their US counterparts…

…but, the question is relative to their US counterparts…are China’s CEO getting under or over paid? Lets put their (China CEOs) salaries in US dollar terms equivalent to US$ using the “Big Mac Rule of Thumb”. In Shanghai, you can purchase a Big Mac for RMB10.41; if the U.S. price is US$2.90, then according to PPP, the exchange rate should be RMB3.59 per US$1 (woops, don’t tell US Trsy Sec Snow!)…but what it really means is we can slap on about 2.2x on the China based CEO…giving him a US$ equivalent (assuming he only buys Big Macs) of about US$130,000…

Takeaway: I think China’s CEOs are getting paid a bit too much…especially if you include options/equity/perks/etc…

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