Lenovo Director's Take Pay Cut For
Performance
The directors of Lenovo, China's largest computer brand,
have taken pay cuts of 40-50% this year because of poor
company performance. This move marks the first time that
a major Chinese company has cut the salaries of their
management for poor performance.
The company, formerly known as Legend Computers, has
taken large hits in the Chinese domestic market, mainly
at the hands of Dell. Previously, Lenovo could count on
steady sales to Chinese government ministries and schools
for its computers, but lately even the Chinese Communist
Party administrative departments have turned to buying
from Dell.
Lenovo has 27% of the Chinese PC market, but its growth
is only 15%. The average growth rate for the Chinese market
is 18%. Dell's shipments in 2003 grew by 48%.
The leading management figures who will take pay cuts
are the founder of the group, Liu Chuanzhi, and CEO Yang
Yuanqing. When Yang Yuanqing became CEO in 2002 at the
age of 39, he was hailed as leading a new generation of
CEOs who would lead Chinese companies to become international
brands. During the same year, Michael Dell, founder and
chairman of Dell, said that the greatest threat to Dell
was Legend Computers.
However, Lenovo has failed to make its internal financial
targets, and seems to have over-diversified into related
fields, taxing the resources of the organization. The
company lost millions on an Internet portal, FM365.com,
which it partnered with America Online to develop. Then
it went into mobile handset manufacture and handheld devices.
At the same time, it tried to get into systems integration
projects overseas, but most of these projects didn't pan
out.
The company's management has promised to focus on its
core PC business, and strive to be competitive there.
Originally, the Chinese government had hoped to hold
Lenovo up as an example of a Chinese company which had
become profitable, and able to stand on its own two legs
in competition with leading international brands. This
has not happened.
Now, the focus will need to turn to management teams
who can deliver the goods, instead of just identifying
companies.
Before you go, did you like this article?
If so, you can receive a free email newsletter version
each weekday. Sign up using the China Business Express
form on this page.
