Research On Correlation Of Compensation Incentive Mechanism And Management Effectiveness

The relationship of corporate compensation incentive mechanism and performance evaluation is always the research hotspots in corporate governance, which is footstone to establish enterprise core competence. However, the traditional performance evaluation index focus on total assessment, dose not taking the difference of corporate objective basis and volume into account, can't accurately reflecting the effective efforts of the operators, having some limitations. Management Effectiveness can overcome these drawbacks, evaluating the efforts of executive effective, which is the direct reflection of compensation incentives. A valid incentive mechanism can ensure consistent interests of owners and managers, making managers strive to realize owners'interests, and mobilizing their initiative, avoiding moral risk and adverse selection. Based on these, this paper is mainly verify the relationship between compensation incentive mechanism and management effectiveness, to measure whether or not establish the links.The article use manufacturing listed company of Shenzhen and Shanghai's stocked market as study objective. Firstly, it apply DEA method to estimate management effectiveness of manufacturing listed company from 2002 to 2004 years, discovering that the overall efficiency is low, but into a upward trend. Secondly, through using regression model to analyze the relations of management effectiveness and executive salary, equity ratio, independence of board of directors, board chairman and manager duality, circulated stock ratio, conclusions are drawn as follows : Executive compensation and equity ratio is related to management effectiveness remarkably. At the same time, the level of management effectiveness is rising as follows as the increasing of circulated stock ratio. Lastly, after considering many factors that impact the executive salary, it make use of the regression model to test management effectiveness feedback to top-manager salary, founding that management effectiveness is also related to executive compensation obviously, and confirming firms'size is related to top-manager salary.In a word, through the preceding empirical testing, it found that there is positive correlation between executive compensation incentive and management effectiveness, and prove that our compensation incentive mechanism play a good role in promoting managers'effort to their enterprise. Meanwhile, management effectiveness can be regard as a critical element in compensation incentive, related to top-manager salary.