China Vanke Co.,Ltd. is set to implement a significant overhaul of its executive compensation framework. On May 8th, the company announced a new remuneration plan for its directors and senior management. The core principle of this adjustment is to further strengthen the link between pay and company performance, alongside the introduction of new withholding and clawback mechanisms.
According to the newly disclosed system, the compensation for full-time directors and senior executives will consist of three components: base salary, performance-based pay, and medium- to long-term incentive income. This signifies a shift from the previous logic of distribution based primarily on the importance of the position. In the future, a portion of the executives' income will be directly contingent on the company's annual performance results.
Previously, the compensation for Vanke's senior executives mainly included fixed salary and an annual bonus. While the fixed portion emphasized that "the higher the position, the lower the proportion," there was no mandatory minimum for the performance-based component. The new system explicitly requires that performance-based pay should, in principle, account for no less than 50% of the total sum of base salary and performance pay. This means a significant portion of the management's personal earnings will be "variable," deeply tied to the company's operational outcomes.
The medium- to long-term incentive income is designed to motivate directors and executives to focus on the company's long-term development, encompassing methods such as equity incentives and tenure-based incentives.
In the current complex real estate market environment, Vanke's latest executive pay reform also clarifies a "performance linkage mechanism." When the company transitions from profit to loss or experiences an expansion of losses compared to the previous fiscal year, the average performance-based pay for directors and executives should, in principle, be reduced accordingly. This does not apply to directors or senior managers who have not yet received any performance pay.
Since 2010, Vanke has undergone several rounds of adjustments to its executive compensation distribution, but these primarily focused on the "year-end bonus" portion, with profit as the core driver. For example, the cash compensation plans for the Chairman of the Board and the President for the 2023-2025 period continue to be linked to annual net profit, with the addition of annual stock price movement as an adjustment factor, using the yearly average of the company's A-share adjusted closing price as a comparative indicator.
Simultaneously, this reform establishes clear rules for "compensation determination, payment, and clawback." The compensation plans for directors or executives are to be formulated by the Board's Remuneration and Nomination Committee, reviewed or approved by the Board of Directors, submitted to the shareholders' meeting for approval or explanation, and subsequently disclosed.
When the company is required to restate its financial reports due to misstatements such as financial fraud, it must promptly reassess the performance-based pay and medium- to long-term incentive income of directors and executives and recover any overpaid amounts accordingly.
If directors or executives violate their duties, causing losses to the company, or are at fault for illegal activities such as financial fraud, misappropriation of funds, or improper guarantees, the company shall, based on the severity of the circumstances, reduce or cease payment of any unpaid performance-based pay and medium- to long-term incentive income. Furthermore, the company may fully or partially recover the performance-based pay and medium- to long-term incentive income already paid during the period when the relevant conduct occurred.
Currently, this round of executive compensation reform has been approved by the 33rd meeting of Vanke's 20th Board of Directors and still requires submission to the company's shareholders' meeting for deliberation. It is worth noting that the reform plan applies to directors and executives serving during the 2026 term. The departure date for Vanke's former Executive Vice President and Director, Yu Liang, is January 2026.
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