A Study On Incentive Mechanism In The Corporate Governance

With the increase of the organizations in modern corporations, the agency relationship is developing to multiple directions. In order to restrict the self-regard behavior of the deputy effectively, reduce the agency cost and improve the efficiency of the corporate governance, the key point is to design a series of restrictive and incentive mechanisms in the corporate governance. The incentive mechanism is not only an important content, but also a necessary condition for the corporation to enhance its competitive power and performance. Based on the basic theories of corporate governance and incentive mechanism, the paper aims to illustrate the important function of the incentive mechanism in the corporate governance. Then the paper uses the experience abroad for reference, examines the limitation of the existing legislations and related mechanisms home, and makes suggestions on its establishment systematically through the integration of the approaches of law and economics.The paper consists of five chapters as following.Chapter One introduces the corporate governance and incentive mechanism, which are like two wings in the corporate governance. Based on the concept of the corporate governance, the author is concentrated on presenting the function and significance of the incentive mechanism in the corporate governance.Chapter Two analyzes the theories of the incentive mechanism in the corporate governance. On the basis of the historic development of the incentive theories, this part introduces the theoretical basis of the incentive mechanism: theories on the behavior science and expectation, the personnel property, the agency and the contract. Thus, it throws light on the contents, the subject and the object concerning the incentive mechanism in the corporate governance. Chapter Three examines the incentive mechanism in the corporate governance abroad which is accorded with two different corporate governance patterns in the world, namely, America-U.K. and Germany-Japan corporate governance patterns. The author deems that it is of great value to use the following mechanisms for reference: the compensation system, the incentive mechanism for the independent directors and the supervisors, the liability insurance for the directors and managers, the market evaluation mechanism of the managers and the stock market mechanism.Chapter Four carries on the review of the existing incentive mechanism in the corporate governance in our country. In the way of enumerating the related legislations concerning incentive mechanism in the corporate governance, the author analyzes the limitations in the systems concerning the establishment of the incentive mechanism, the compensation incentive mechanism, the liability insurance for the directors and managers and the incentive mechanism for the independent directors and supervisors and conducts a cause analysis.Chapter Five puts forward the suggestions on the perfection of legislations concerning the incentive mechanism in the corporate governance in our country. The author suggests using the experience of the corporate governance abroad according to the existing situation in our country and further perfecting the incentive mechanism in the corporate governance from the following perspectives: establishing the performance evaluation standard and an independent compensation committee, optimizing the system of year-paid compensation, stock options, liability insurance for the directors and managers and the incentive mechanism for the independent directors and supervisors.