Business Return On Pay Theory

The separation of ownership and control in corporations is a central feature of modern economies. The interests of professional managers may not necessarily coincide with those of absent, dispersed owners. Executive compensation payment contract is critical in aligning the interests of divergent organizational groups, usually used to alleviate conflicts between corporation investors and managers and to reduce the moral hazard problems. Business practices have proved that effective arrangements of executive compensation help to make agent act in the best interest of principals. On the academic side, much valuable studies in executive compensation has focused mainly on exterior factors, pay-performance sensitivity. In my opinion, there leave some unexplored concerns: (l)executive compensation's interior characters; (2)executive performance evaluation measures and standards; (3)comprehensive research on our country's executive compensation payment. And the purpose of this dissertation is to do some work on those three issues.This dissertation is organized as follows: Chapter 0 is introduction. Chapter 1 reviews the relative theoretical background and literature. Chapter 2 starts with an executive compensation payment model. Based on the model, I discuss the structure, payment forms and levels of executive compensation. Chapter 3 expounds how to evaluate manager's contributions to the firm. In this chapter, I analyse executive's external and internal contributions, and provide viewpoints on selecting performance measures and standards for executive evaluation. Chapter 4 generalizes the present situations of executive's compensation payment in our country and gives relevant improvement suggestions. Chapter 5 summarizes and concludes the paper.