Empirical Research On Executive Compensation Dispersion And Performance In Listed Companies

Executive compensation dispersion, which began to win widespread concern on salary system in theory and practice during the 1980s, has been a main part of management of corporations for a long time. However, the present research places more emphasis on the relationship between performance and overall salary levels of executives, and pays less attention to interrelationship between enterprise performance and executive compensation dispersion, especially dispersion of top management team and ordinary employees. Executive compensation dispersion has a direct impact on the morale of all employees and then further affects firm performance, while the existing researchers have not got an accordant conclusion on this problem. Therefore, the study on the relationship mentioned above is of great significance, in theory it can promote development of compensation while in practice it enable us to recognize and value objectively the reform of salary system and give scientific directions on salary decision.The author selects data from 2007 to 2009 in A-stock market in listed companies of both Shanghai and Shenzhen and combines normative studying with positive studying together to analyze the relationship between performance and compensation dispersion among members of top management team, and the relationship between performance and compensation dispersion among executives and ordinary employees. In order to control other factors affecting performance and make research results relatively accurate, control variables are used, including enterprise size, capital structure, state-owned shareholding ratio and concentration ration, etc.The results show that compensation dispersion among members of top management team, and among executives and ordinary employees have an active effect on enterprise performance, which support Championship Theory. It implies that it is feasible and reasonable for listed companies to widen compensation dispersion among members of executives and between executives and ordinary employees to stimulate their enthusiasm and then improve performance.