An Empirical Research On The Influence Of Compensation Gap Of Intra-Listed Companies In China On The Company Performance

The issue of compensation design of intra-companies has become a top issue which is concerned by the circle of theory and practice since 1980s.This is because the problem of compensation gap has a direct impact on the working mood of inter-company employees, thereby effects the performance of the whole company. But most of the existing researches only discuss the relationship between the compensations of executives and company performance. The existing researches about the relationship between compensation gap of intra-companies and company performance are little relatively and the conclusions are not consistent. Meanwhile, existing researches have rarely involved in the specific application environment of compensation gap and whether there are some variables play the role of regulating to the relationship of compensation gap of intra-companies and company performance. Therefore, the research to the relationship of compensation gap and company performance and the specific application environment can not only advance the development of the compensation theory of our companies in theory, but also understand and evaluate the reform of compensation system of our companies objectively. It can guide the compensation decision and staff management scientifically and has important theoretical and practical significance.This paper selects the data of A share market from listed companies which are listed in Shanghai Stock Exchange and Shenzhen Stock Exchange from 2006 to 2008, uses the method of combining the normative research and empirical research, researches the influence of compensation gap of intra-companies on the company performance from the two different aspects of the compensation gap between executive management team and between executive management team and ordinary workers. This paper introduces two variables which are the independence of board of directors and the risk of stock market in order to test whether there are some moderator variables play the role of regulating to the relationship of compensation gap of intra-company and company performance. This paper tests separately whether the independence of board of directors and the risk of stock market play the role of regulating to the relationship of performance gap between executive management team and company's current performance and whether the risk of stock market plays the role of regulating to the relationship of compensation gap between executive management team and ordinary worker and company's current performance.The results of empirical analysis show that both the compensation gap between executive management team and the compensation gap between executive management team and ordinary workers play the role of enhancement to the company's current performance. This result supports the tournament theory and show that tournament theory has been an available theory which explains the influence of compensation gap (including the compensation gap between executive management team and the compensation gap between executive management team and ordinary workers) of intra-listed companies in China on company performance. The results of empirical analysis also show that the enhancement of independence of board of directors and the risk of stock market will reduce the positive impact of the compensation gap on company performance of intra-companies.The main innovations of this paper are:1. It not only consider the monetary compensation gap, but also consider the return on equity gap and on the consumption gap in defining the compensation gap between executive management team and the compensation gap between executive management team and ordinary workers and can reflects the overall content of compensation gap.2. The measure of compensation is more accurate. This paper organizes the president and the CEO's annual compensation data separately from the annual reports of listed companies.3. This paper adds two moderator variables in order to test the influence of specific environment on the role of compensation gap. Thus we can know whether the two moderator variable play the role of regulating to the relationship of compensation gap of intra-company and company performance.