The Research On The Payment Of Executives In Chinese Financial Listed Companies

The 2007 world economic crisis first overspread from the Wall Street in America, which overwhelmingly impedes the prosperity of the world economy and greatly decreases the speed of the recovering of the world economy. It is a view held by most people that in order to pursue higher payment, financial executives deliberately conceive high leverage rate and non-asset-backed junk bonds resulting high risk of financial crisis for the entire country and endangering the national economy and the overall development of people's life quality. Under such circumstances, the U.S. president Barack Obama and the new treasury minister Geithner announced restrictions on the Wall Street:from now on, the maximum annual salary of financial executives in financial enterprises which receive government aid could not exceed more than 50 million, equivalent to 3.5 million RMB. Although payment scheme announced by "Fannie Mae" and "Freddie Mac" on Dec.24,2007 illustrated that the annual salary for the CEO, Michael Williams in "Fannie Mae" and the CEO, Charles Haldeman in "Freddie Mac" is no more six million dollars, the restriction is almost non-existent. However, it provides a reference for pay restriction for financial executives in our country.Financial enterprises themselves are based on high risk and most listed financial enterprises are state-owned ones. Because of and various reasons, it is extremely difficult and complicated to designate and observe the salary of financial executives who work in our country's banking, insurance, securities and other listed companies. There exists divergence on the level of payment. Financial executives present that their pay levels and their responsibilities are not balanced based on the point that their payment is much lower than that of financial executives working in Wall Street. But compared with common citizens, their payment is extremely high. It results in a great deal of controversy and argument for the payment of financial executives working in Chinese financial listed companies. Incentive and restraint mechanisms in every industry are determined by the level of economic development and labor productivity. In order to reform perfect incentive and restraint mechanisms of the Chinese financial executives'payment, the first consideration is to avoid the gap between the rich and the poor, and the gap between the development of industries. This paper analyzes the current state of incentive and restraint mechanisms for financial listed companies in executive payment, indentifies problem, and proposes the solutions based on the experiences of America and Japan, which is of great significance for the financial listed companies to improve business performance, promote financial reform and support the financial industry with Chinese characteristics to better national economic development mode.The thesis firstly summarizes the executive compensation on incentive and constraint mechanism of the basic theory. Then, based upon the data of 26 samples of financial listed companies, it analyzed the status quo of incentive and restraint mechanisms for financial listed companies in executive payment and identified problems and analyzed the factors. In addition, it reconstructed incentive and constraint mechanism according to American and Japanese experiences; applied game theory to analyze and compare pros and cons of the annual salary and stock options of the system; redesigned annual salary and stock options pay system and pointed out the path of the reconstruction for financial constraint mechanism.