Top-Executives Compensation And Firm Performance In Hi-Tech Companies

Knowledge-economy is rising energetically as a new economy form in 21 century. One distinctive feature of the knowledge-economy is the knowledge, intelligence, and intangible capital as the most important invest resources instead of the tangible assets. It is estimated that more than 50% of gross domestic product in the major developed economies is now knowledge-based. Knowledge is becoming the most important source of growth as well as productivity. Information means competitive advantage, and knowledge leads to progress. And hi-tech companies as one of the most vigorous economic organization forms in knowledge-economy represent the way of economy development in future. The keys to the strong economic and culture growth of a nation's future are successful generation, acquisition, diffusion, and exploitation of knowledge, and support the domestic hi-tech companies growth more strongly to compete the global competition of new economy.One of the most important factors of restricting the development of Chinese hi-tech companies is the absence of excellent leaders. And compared with the same kind companies in developed countries, the compensation incentive means to top-executives in Chinese hi-tech companies are still very and inefficient. There are many problems in the top-executive incentive system of domestic hi-tech companies, for example, the incentive idea and concepts are old, incentive system is not enough flexible, the use of incentive means is inappropriate, incentive result is inefficient, and lacking an effective and powerful restrict mechanism etc. these disadvantages make it's difficult to incentive the top-executives effectively to work hard and bring the company more worthy return. So researching one of the key questions in companygovernance------top-executives incentive mechanism------in hi-tech companies as aspecial firm type, not only have theoretic meaning, but also have practical significance to enhance the core-competitiveness of domestic hi-tech companies. In this paper, we use the detail data from a sample of 199 Chinese listed hi-tech companies to examine the relationship between top-executives compensation and firm performance empirically. This study tries to find out if the top-executives compensation incentive in domestic hi-tech companies could affect firm performance significantly, and research the important factors of the top-executives compensation system, so we could design a relative rational and effective top-executives incentive mechanism based on these main effect factors.In the practical empirical program, firstly we examine the relationship between the top-executives cash-pay incentive, top-executives stock incentive, compensation gap and firm performance in domestic hi-tech companies respectively. Our results show that the top-executives cash-pay is positive relative to firm performance significantly in domestic hi-tech companies. This indicates the cash-pay as the principal part of compensation system in domestic hi-tech companies has incentive effect strongly. Our result also show top-executives stock incentive is little positive relative to firm performance, but this relationship is not significant. This suggests that stock incentive has a little incentive effect in domestic hi-tech companies, but the real effect is restricted because the amount of stock grant is too few. There is a significant positive relationship between compensation gap and firm performance in domestic hi-tech companies. It indicates that "tournament theory" is fit the actual environment of domestic hi-tech companies.Subsequently, we analyze the possible important effect factors of top-executives compensation level. Our study results show that top-executives hold shares is not effect on the extent of top-executives cash pay significantly in domestic hi-tech companies. This result is distinct with some other scholars' studies. It's maybe the extent of top-executives hold shares in our sample is too low. CEO duality is positive relative to top-executives compensation level significantly in domestic hi-tech companies. It suggests CEO could gain more benefits from the compensation decision-making when CEO also assumes the office of board chairman. Company size and top-executives compensation level in domestic hi-tech companies, area diversity also is positive relative to top-executives compensation level significantly in domestic hi-tech companies. These results are consisting with other previous scholars' studies.Finally, we examine the possible important effect factors of top-executives compensation gap. Our results imply that there is a significant positive relationship between the extent of top-executives compensation and top-executives compensation gap in domestic hi-tech companies. Top-executives hold shares are not relative to top-executives compensation gap significantly in statistical, but the results of description analyses indicate that the extent of compensation gap in the companies which top-executives hold shares is larger than that in the companies which top-executives don't, hold shares. The relationship between CEO duality and top-executives compensation gap in sample companies is not passed the statistical test, but the results of description analyses indicate that the extent of compensation gap in the companies which CEO assumes the office of board chairman is larger than that in the companies which CEO doesn't assume the office of board chairman. Company size is negative relative to top-executives compensation gap significantly in domestic hi-tech companies. The relationship between area diversity and top-executives compensation gap in sample companies is not passed the statistical test, but the results of description analyses indicate that the extent of compensation gap in north and south is larger than that in middle and west.As the "reform of non-tradable shares" has been accomplished successfully, Chinese securities business is becoming more legal, standard, and rational. In this macro-economy context, and based on our empirical study results, we consider that the domestic hi-tech companies should emphasize the importance of stock-payment when design top-executives compensation system, and beside maintain the principal status of annual salary in the top-executives compensation system, the proportion of stock-payment (such as stock option, stock grant etc.) should be increased appropriately in the total top-executives compensation system based on the actual inside and outside environment of company to diversify the top-executives compensation system, in order to enhance the pay-performance sensitivity and incentive power to top-executives. Furthermore, when design the top-executives compensation system, domestic hi-tech companies should extent the compensation gap between top-executives appropriately, in order to enhance the competition and incentive effect of top-executives compensation system.