On Directors' Compensation In China

Building a reasonable directors' compensation system and improving the governance structure of the company have become one of the hottest topics in the world. After the global financial crisis caused by loan from the United States, the huge salaries of directors is pushed to the air wave. How to motivate directors effectively and how to reduce agency costs become the most disputed topic of scholars. The United States, the European Union and other countries formulate new laws and regulations to regulate the compensation of directors strictly. Currently, there isn't a perfect legal system to regulate the directors' compensation. Therefore, It is great significant to analyse the problems existed in our country's corporate governance structure, and build the directors' pay system as foreign advanced management experience for improving our corporations' structure.This paper starts with the problems caused by the directors' compensation self-induced , analyses the origin of the self-pay system carefully and determine the foundation and principles of the directors' compensation, finally, proposes some recommendations to improve the directors' compensation system. The full text is divided into three parts, and about 1.5 million words.Partâ… : This part is about problems caused by directors' self-induced compensation. Mainly focuses on the company's pay strategy, the composition of directors' compensation, self-pay, and the lack of credibility of self-pay. By analyzing the company's compensation strategy and the composition of thecompensation of directors, directors' compensation can be found unreasonable in our country; by comparing the changesof compensation and operating results, the fact that the rapid growth of directors' compensation in in some companies but no difference in some other companys is apparent; by analysing the body determined by directors' compensation and the procedure,there's the fact that some directors determine their pay selfly the pay affected by self-pay system and the lost link caused to legitimate crisis.Partâ…¡: This part is about making sure the basis and principles of directors' compensation. Mainly discusses the basis of directors' compensation from the control of agency costs and ownership structure. In addition,this section also discusses it's three principles.those are the principle of combining performance with directors' compensation; the principle of combining short-term incentivewithlong-term incentive, and the principle of considering the interests of other stakeholders.Partâ…£: This part is about suggestions of improving the directors' compensation system, we have learned the problems existed in the directors' compensation system and the factor should be considered in dealing with directors' compensation from the previous two sections. This part finally making some suggestions on improving our directors' compensation system by experience in governance from other countrys and the actual situation of our company.