Research On Implicit Incentives To Managers Based On Managerial Labor Market

In the past two decades and more, great changes have taken place in the management system of the state-owned enterprises in China. But the reformation in the property structure and the corporate governance structure still needs to be improved. Thus people have paid more and more attention to the peifection of the incentive mechanism of the managers. For the moment, the research on the incentive problems of the manager of the state-owned enterprises focuses on such explicit incentives as annual pay ,bonuses, options and so on, but lacking the research of the other part of the incentive mechanism-systimatic research on the implicit incentives which based on Managerial Labor Market.The classical explanation of our theorists about the short-term gains of the managers in the state-owned enterprises is that: it is lack of explicit incentives which causes the mismatch of payment and merit that leads to the short-term gains. The shortcoming of this view lies in the omition of the important fact: the low efficiency of the explicit contract, such as options, partly because there are some drawbacks in the designation and operation of explicit incentive mechanisms. On the other hand, more important, it is because of the ineffective of the explicit incentive mechanisms, which makes the explicit incentive mechanisms inefficient.During the economic transiton period, because of the imperfection of the outside macket system, the managers of the state-owned enterprises need not to face the menance or strain which comes from the marcket. In the mean time, the cost of pure explicit incentives is rather high. So only explicit incentives it is not enough to make the managers work hard. If we only pay attention to inner incentives of the enterprises with out pay any attention to managerial market and its influence on the behavior of the managers, This "disease" of the distortion of incentives could not easily be rooted out. So the status of implicit incentives become more and more important and necessary to explicit incentives.General corporate governance structure includes inner governance structure and outer governance structure. The former means to indirectly control the behavior of the manager through the managerial labor market, while the latter means to stir up and also control the managerial behavior by the owner of some specific enterprises, also the designation of payment systerm. Inner governance structure based on outer governance structure, and it can be efficient only under the condtion of matching the outer market competition. With out the pefection of outer market, any method borrowed from other countries can not bring out ideal result. Incentives with high efficiency must be the organic combination of both explicit incentives and implicit incentives.With consideration of the recent condition of China, and aim at pefection the environment of market and building up the competitive managerial labor market, use market methods to carry out effective implicit incentives become more and more important. We can find enough resources about explicit incentives, but find that, the research on implicit incentives streams from the early 80s—the researchers in the name of Fama,Holmstorm, based on market competition, built up the reputation model to make some research on implicit incentives. In the author's sphere, we can find many articles focus on implicit incentives, but with out any systematic research on the problems of implicit incentives. Pay sufficient attention to implicit incentives can help to thereticly solve the problem of managerial market development. The development of managerial market is critical to the reformation of our state-owned enterprises, without which can leads to the failure of MBO,ESO and so on. So attach importance to the research of implicit incentives which based on the managerial market can be a hot topic of the reformation of our state-owned enterprises.As already stated in our previous letter, to build up the reputation machanism should based on perfect managerial labor market, which is the premise of wasetrn researcher's theory achievement. In our country, the managerial labor market needs further perfection to support the operation of reputation machanism. What's more, managerial labor market is a huge system, the paticipant in which not only includes state-owned enterprises, but also private enterprise and the enterprise of foreign investment. Domestic researchers payed more and more attention to the affection of reputation machanism on state-owned enterprises, but neglect the private enterprise and the enterprise of foreign investment. But the performance of reputation machanism Depends on a united, open, competitive and ordly managerial labor market. So the research sphere of this paper includes not only state-owned enterprises, but also private enterprise and the enterprise of foreign investment. How can we neglect the development and perfection of the whole managerial labor market which includes state-owned enterprises, private enterprise and the enterprise of foreign investment?This paper focuses on the implicit incentives of managerial labor market. Based on a panorama of the theory achievement of wasetrn researchers and domestic researchers, to elucidate the machanism of the implicit incentives which comes from the managerial labor market. The author has taken part in the project of "Drive and Control of the managers of the enterprises of Beijing", and hold responsible for the relative research of a sub-project. The sub-project began at January,2006, with 300 questionaires(173 valid) and face to face interview. Valid questionaires include 23 state-owned enterprises, 129 private enterprises and 21 enterprises of foreign investment. In this paper, the author will combine the resource of questionaire and interview with reputation theory and model, deeply analyse the implicit incentives in China managerial labor market. And hope to draw some constructive conclusions which is useful to the perfection of our profetional manegerial labor market.