Design Of The SOE Operator's Annual Salary System

The separation of ownership rights from control rights brings forth the principal-agent problem between the tangible assets provides (the principals) and the intangible assets provides (the managers).In general, the owner's objective is different from the manager's. The corporate owner needs to establish the incentive and obligation mechanism, which can align the interests of the manager with shareholders, to supervise and motivate the manager. All constitute the core units of the theory of the firm. Moreover, the incentive mechanism of the operator is the key factor for our state-owned enterprise reform. The government has adopted many kinds of incentive mechanism of the state-owned enterprise operator, though the result is not very good in practice. So how to establish the incentive mechanism to encourage managers to make them work hard for the owners' interests and improve the performance of the state-owned enterprises is a very important task of research to the Chinese scholars at present.The operator's annual salary system, which aimed to arouse the SOE operator's enthusiasm has, in recent years, become the heated topic for the SOE operator's frustration. And, in the incentive mechanism, carrying out the operator's annual salary system as an experiment unit is a beneficial attempt in China, though many questions exist in the design and the implementation of the operator's annual salary system, and the anticipated result hasn't yet been achieved. In this article, some new designs as well as some appropriate suggestions are put forward, and I hope that can inspire the manager better in practice.As an efficient incentive mechanism, the operator's annual salary system is the important content and specific form of the operator's incentive compensation schemes, which prevail in west enterprises. And it is significant to establish the operator's incentive mechanism, arouse the manager's motivation and their imitation, and promote the state-owned enterprise's reform. So, under our actual condition, the operator's annual salary system is studied which is based on becoming human capital as property rights by gradually quantitative and quantitative analysis on the basis of qualities of relative documents in this paper.The incentive compensation of SOE operators is the main issues of the corporate governance. The research on the incentive mechanism, whose difficulty and stress focuses on the design of the compensation mechanism, includes the proportion of the salary, bonus, stock option and selection of the target of firm performance, etc. Becauseof the flaws in the marked mechanism and corporate governance in our country, we need think more over, such as the object of the applied, stock option and the internal & external environments in the design of the SOE operator's annual salary system.The operator's annual salary system is a kind of incentive compensation mechanism. First of all, the theoretical foundation of the incentive compensation mechanism has been discussed. In this chapter, I resort to the principal-agent theory and the theory of the property rights of human capital, which belong to the theory of the modern corporation. So the incentive compensation for the operator should be established in our country, supporting in theory for the implementation of the operator's annual salary system.On the basis of the principal-agent theory, the conception and the peculiarity of the operator's annual salary system are discussed, and the main models of the implementation of the SOE operator's annual salary system have been listed. Compared to the American incentive mechanism model, there are many flaws in the SOE operator's annual salary system of China . First, because of the influence of the old idea of distribution, the object of the SOE operator's salary system is not very distinctly, which blocks the implementation of the incentive mechanism. Second, there are only short-term incentives in the design of the structure of the SOE operator's annual salary system. Lack of long-term incentive may le...