St Executive Pay Incentives

May of 1998, there appeared the first group of listed companies suffered special treatment in Shenzhen Stock Exchange and Shanghai Stock Exchange. Those companies are brief named ST companies and up to now one hundred and twenty four listed companies still have been under special treatment, and therefore we can't ignore the significance of the block in the stock market. There are a great deal research works involved ST company block and mostly those are concerning Bankruptcy Prediction Model, Earning management and so on, rather than there are few studies on that from the point of view of the encouragement. It is well known that the manpower capital has become the most worthy resource in the company along with the development of the knowledge-based economy, and accordingly it is worth while to study how to establish the reasonable Incentive System for the ST companies with the poor outstanding and achievement. Before scheming out incentive compensation system for the administrators of the ST companies, it sets forth the evolution and the significance of the ST institution in the first part of the article, and next it detailedly analyses the present circumstance of the encouragement to the administrators, and further more it takes the incentive mechanism of ST company into account theoretically. Finely it puts forward the designment to the ST company incentive system on the basis of the analysis. The text is divided into four parts. The first chapter is named the evolution and significance of the institution for ST firms, and it introduces the background of the ST company which is the object the paper studies. The part concludes five development processes about the ST institution after surveying the rules of issuing stock in China and consulting the notice about the ST institution which is publicized by the Chinese Securities and Exchange Commission, and they are the prologue of ST institution, the Particular Transfer institution which is coordinative to the ST institution, the end of the PT institution, the caution of the ST institution which means the alert effect to the listed companies. In the seven years the institution exerts important contribution to the market such as the caution function, the oversight function and improvement of the reasonable configuration of firms. The second chapter is named the analysis to the present circumstance of incentive system for the administrator of the ST companies, and it works over the present condition in the qualitative and quantitative, normative and positive methods. The article selects the samples from the ST companies in 2002 and the companies throwing off the ST title in 2003, and takes descriptive statistics on the salary level of the administrators', the conditions of the share holding of the administrators and the mechanism of incentive to the managers relied on the published annual report. It draws the conclusion that the firms that have established the incentive system are prone to throw off the ST title through the investigation of encouragement system on the ST companies, the firms cutting off ST title and the companies exiting off the market. And it brings forward the necessity to establish the incentive system for the administrator of the ST companies. It also reveals that the setting of some incentive systems' is not reasonable to encourage the manager through the process of reviewing the establishment of the ST companies' incentive mechanism. And the thesis also finds owing to the lower number of holding share of the managers it causes the shortage of power to stimulate the enthusiasm. Thus it can be seen that the ST firms not only need to establish the incentive system and also to set the reasonable mechanism to encourage the managers. The third chapter is named the theoretic analysis of the STcompanies' incentive system. The aim of this part is to seek the theoretic support to establish the incentive system. It demonstrates the essentiality to setting the system on basis of the Agent theory, the Manpower Capital theory and the obtain...