An Empirical Research On The Relationship Between Board Governance And Top Manager's Compensation In Listed Bank

The relationship between Board Governance and Top Manager's Compensation has always been the difficulty and focus in the theory and practice. People have tried to construct reasonable remunerations arrangement for various stakeholders, but there exist some arguments in the theory and practice. The above situation is much more obvious in the China's banking industry. With the full liberalization of the financial services industry, the market competition become more and more stiff and is facing severe challenges.For meeting the challenge, the banking industry which plays an important role in the financial industry reforms its own management system, such as the introduction of international strategic investors, joint-stock transformation, split share structure reform, an annual salary system, etc. The bank performance has got generally increase. In recent years, the top management salary has been always the first position, and continues to rise. Especially, Frank.N.Newman got highly paid 22.85 million yuan which become a new record in the top management salary of bank. "Astronomical remuneration" has aroused widespread concern in the society. At the same time, social sessions begin to doubt the institutions and procedures of making the salary system.As we know, one of the important functions for the board agency is to develop a reasonable salary system for the top managers.However, whether the board agency can develop a reasonable salary system or not has been a problem. Some scholars view, the top managers may use their own powers to make much more salary for themselves. So what role does the board agency play in the development of executive compensation, and how does it affect highly paid for executives.This paper first reviews the literature about board governance and executive pay in the foreign and domestic. Next, sums up points and make some comment. Then, this paper explores the hypothesis. Base on the hypothesis, this paper uses the quantitative data sample which includes all the "A-shares" in Shanghai and Shenzhen stock market from 2004 to 2008.On the basis of descriptive statistical analysis, the article makes regression analysis.That is, used top management compensation as dependent variable, and adopted size of the board, the board composition, the leadership structure of the board and the numbers of board meetings as independent variables, setting up linear regression models, analyzing the relation of board governance and top management compensation. Empirical results show that board size and cash compensation have positive correlation, big size is not conducive to design management compensation according to the interests of shareholders;the proportion of independent directors has significant impact on top management compensation; the separation of CEO and board chairman can reduce the compensation obviously and the number of board meetings is positively related to top executive pay. The increased frequency of the Board meeting will help improve the efficiency of the board governance. Finally, the paper makes some constructive suggestions for strengthening the board governance structure.