Lenovo, which became internationalized through the acquisition of IBM's PC business, does indeed need to adjust its executive compensation to a level that provides sufficient incentives for contributing executives. However, the CEO's compensation in a publicly listed company also needs to pass the "public test." This test is not whether the compensation is actually high, but whether the public perceives it as being high. It is an art, rather than arithmetic. This has some resemblance to how director Ang Lee describes movies in *Crouching Tiger, Hidden Dragon*: "In a movie, you see a 'handsome man,' or rather, you 'feel' like you see a handsome man." Yang Yuanqing's 20 million yuan compensation became a public focus because the public perceived it as being too high.
According to Lenovo's annual report, Chairman Yang Yuanqing's total compensation for the fiscal year 2005-2006 was 21.75 million Hong Kong dollars, more than four times the previous year. The combined compensation of Lenovo Group's board members and the top five highest-paid individuals rose from 12.7 million Hong Kong dollars in the previous year to 175 million Hong Kong dollars in this year, an increase of 12.8 times. These compensation figures have sparked significant public debate domestically, with some saying that Lenovo's internationalization is not about internationalizing its business but aligning its compensation with international standards. Yang Yuanqing's latest explanation shows that he may not realize that the issue isn't whether he and Lenovo's executives deserve this compensation, but how he can take this compensation without affecting Lenovo's growth: externally, avoiding negative public perceptions that harm the company's image; internally, avoiding employee psychological imbalance that affects company operations.
Such arithmetic comparisons and logical analyses might make sense on principle, but attempting to use them to influence public perception will likely yield poor results. When the public considers such issues, emotions run high. Communication expert Simmons Annette said: "Fairness doesn't refer to right or wrong, but what is perceived as right or wrong... The side effects of ignoring emotions will quickly manifest." The controversy over Yang Yuanqing's compensation isn't driven by logic, but by emotion. A phenomenon inconsistent with logic serves as proof: the relatively much higher and less reasonable compensation of Lenovo's two CEOs, Ward and Amelio, didn't attract much attention.
From the perspective of compensation structure, Yang Yuanqing reasonably explained the significant increase in his 2005 fiscal year compensation: first, due to bonuses, Lenovo executives' compensation includes a higher proportion of bonuses. In 2004, Lenovo's performance was historically the worst, and executives only received 10% of their target bonuses; in 2005, performance was good, so bonuses were higher. Second, changes in accounting standards required equity incentives to be counted as costs, and thus included in compensation. This income is tied to stock prices, not equal to the amount included in compensation. If the stock price hadn't risen that year, the beneficiaries would not have actually received any income. Third, the 2005 income included a one-time pension contribution. Lenovo had no pension system before, but starting in 2005, they implemented an enterprise annuity plan. Since Yang Yuanqing had been at Lenovo for 18 years, his one-time pension contribution was substantial.
The actual situation differs greatly from this common perception. In fact, whether Yang Yuanqing's compensation is high depends on what benchmark is used for comparison and what constitutes this compensation. The compensation of Lenovo's two CEOs was as follows: former CEO Ward worked for Lenovo for eight months and earned 112 million Hong Kong dollars; new CEO Amelio worked for about three months and earned 18.83 million Hong Kong dollars. Yang Yuanqing's position is chairman, but considering Lenovo's current global management structure, since he manages the Chinese market, he likely assumes at least half of the CEO responsibilities. Therefore, if judged based on Lenovo's CEO compensation and Yang Yuanqing's responsibilities, his 20 million Hong Kong dollar compensation cannot be considered high. Compared internationally with peers, Yang Yuanqing's compensation is similar to what he himself explained: at the 50th percentile average level, Lenovo is at the 30th percentile, which is not high. Of course, if compared with the average annual salary of 290,000 RMB for executives of domestic listed companies, Yang Yuanqing's compensation is indeed too high, but such a comparison is meaningless.
In fact, if the public insists on questioning Yang Yuanqing about executive compensation, they should ask why, as the leader of the board, he decided to give such high compensation to the two CEOs? Using the simplest method of calculation, Lenovo's former CEO Ward's annual salary was 21 million USD; new CEO Amelio's annual salary was 9.4 million USD. Compared internationally with peers, both of their compensations are quite high: according to the U.S. "Top 100 Tech CEO Compensation Report," in 2005...