Research On The Effectiveness Of Compensation Committee Of Listed Companies

As an important part in corporate governance structure, the Compensation Committee System (CCS) generated and developed, starting from seeking an independent strength of supervision. The special committees(chapter 3) under the board of directors on《Corporate Governance Guidelines》in our country regulates: according to decisions of shareholders convention, the board of directors of the listed companies may set the special committees on stratagem,audit,nomination,reward and examination and so on. It also regulates mostly functions of compensation committee: studying examination standard of directors and handlers, examining and making a proposal, studying and checking salary policy and project of directors,top managers. With the establishment and development of the CCS in our country, there is a growing concern about its effectiveness. Then, the CCS sets in the listed companies, whether or not the CCS could play it due role as regulation of《Corporate Governance Guidelines》, and it is only a"surface project"? In this paper, I want to probe the effectiveness of the CCS, from the following two perspectives: the salary level of CEO and the pay-performance sensitivity of CEO.In this paper, we will respectively bring forward two teams of hypothesis: (1)the companies which had set up the CCS have a lower the salary level of CEO, the proportion of the CCS independence directors have the negative correlation with the salary level of CEO; (2) the companies which had set up the CCS have the positive correlation with the pay-performance sensitivity of CEO, the proportion of the CCS independence directors have also the negative correlation with the pay-performance sensitivity of CEO.In this paper, we use the data from Chinese listed companies in 2007 and 2008, to carry out empirical research, and we find out: (1) compared with the companies which had not set up the CCS, the companies which had set up the CCS have a higher the salary level of CEO; in the companies which had set up the CCS, the proportion of the CCS independence directors takes on the positive correlation relationship with the salary level of CEO. Only to opposition, the CCS drives up the salary level of CEO of listed companies in our country. (2)The companies which had set up the CCS have not the mutual influential evidence with the pay-performance sensitivity of CEO, and we do not also find the proportion of the CCS independence directors have the significantly relation with the pay-performance sensitivity of CEO, and it shows the CCS of listed companies in our country is a"surface project"in corporate governance structure, and the CCS does not help CEO salary have a tight contact with performance of companies. So the CCS in our country does not bring into play its functions, and its effectiveness need be improved, in order to implement originally the intention of the CCS.