Research On Evaluation Of Executive Compensation Incentive

Under the financial crisis, average net profit of all Listed companies has fallen, but executive pay did not fall but actually increased. So pay-distance between executive and workers become much larger. The Government issued a number of laws and regulations to regulate executive compensation, but it did not quantify the scope of executive compensation, and the rules are lack of maneuverability. In this paper, we build a evaluation index system of executive pay, so it help the Government to formulate the standards regulating executive compensation.First, we analysizes the factors that affect the strength of manager compensation. So as to build the system of executive compensation incentive index. We build the evaluation system from two aspects: efficiency and equity. The efficiency index includes performance sensitivity of executive compensation, firm size sensitivity of executive compensation. The equity index include the ratio of managers and workers compensation, the ratio of area average pay and executive compensation, the ratio of industry average pay and manager compensation. Secondly, we analysis China's managers compensation by the evaluation index, the results is that we divided incentive compensation into three parts: little, moderate and excessive were tested the reasons of the similarities and differences. We find that the major shareholding significantly inhibit the lack of corporate managers incentive pay, while the manager stimulate excessive corporate compensation had no significant effect; Enterprises with insufficient incentives for managers related to strong corporate performance, and company size weakly related; corporate with excessive executive has a weak correlation to performance ,strongly correlated with company size; board size and composition had no impact on executive pay in all companies. Finally, according to previous research findings , from the market, government and enterprise perspectives, we make a number of recommendations to improve the system of executive pay.