Legal Regulation Of State-owned Executive Pay Reasonable Path

Executive compensation is an important system in Corporation Law. The system is directed to reduce the agency cost in company's operations and improve the value of company. An effective compensation scheme is generally considered to be linked with the operating performance, and its effective degree is proportional to the correlation between the two. The practice and experience of foreign legislation on executive compensation tell us that only when the market cannot guarantee the strong relevance of executive pay and performance, we need to enhance the role of law. But even so, the role of law is limited, and its mode of action is specific-oriented. The law should not and cannot determine the specific forms and amount of executive compensation. The objective of regulating executive compensation is to ensure and strengthen the positive correlation between the executive pay and company performance, which is commonly referred to as "pay for performance".The issue of state-owned enterprises executive compensation in China has problems with international traits and its own particularity. In the context of distribution of state-owned economy, the correct way is regulating respectively for different types of state-owned enterprises, based on the reorganization of the nature and function of certain state-owned enterprises. For different types of state-owned enterprises, the manner and extent of regulation is not the same.This article comprises the introduction, the text, and the conclusion.Introduction proposed the basic theory and practical background of the regulation of state-owned enterprises executives pay, and thus leads to realistic significance and purposes of this study.The text consists of four chapters.Chapter I points out the object, the history and the present situation of this issue. The first part of this study identified the category of two key objects, in which "state-owned enterprise" refers to the wholly state-owned enterprises and company, as well as state-holding company; "executives" refers to the operators (directors and managers) as the main body, including financial executives, secretary of board of directors and other senior management. The second part reviews three representative historical stages of the state-owned enterprises executive pay, as well as the basic features of state-owned enterprises executive pay at each stage. The third part points out the situation and major problems of state-owned enterprises executive pay at current stage.Chapter II analyzes the theoretical framework and China's specific reality background in respect of executive compensation. The first section presents two basis theories, namely, human capital theory and agency theory which includes the team production theory and the principal - agent theory. A basic idea derived from the theory above is to establish an incentive compensation system according to observable performance variables, which can reflect the human capital value of executive management, in order to achieve the compatibility of interests between managers and shareholders. Through the analysis of our reality, the second part explains the reason that causes the deviation between theory and reality, which causes the current problems of state-owned enterprises executive compensation. Meanwhile, it also explained the necessity of legal regulation of state-owned enterprises executives pay.Chapter III examines the situation in terms of legal regulation of state-owned enterprises executives pay in western countries. The first part introduces the legislation and judicial practice of executive compensation in Western public companies, and discusses the role of law in accordance with the purpose and effect of that regulation. The second part inspects macro-control management system of state-owned enterprises and regulatory mechanisms of state-owned enterprises executive compensation in western countries, and sums up the features of executive compensation regulatory system in state-owned enterprises of western countries and reference for China's state-owned enterprises as well as the fundamental differences between the western state-owned enterprises and China's state-owned enterprises.Chapter IV explores a reasonable path to legal regulation of China's state-owned enterprise executives pay. The first part systematically straightens out current legal regulation of executive compensation system in China in two aspects: the system and the content of regulation, and points out the deficiencies in existing regulation. The second part put forward the concept of "classification of regulation" for different types of state-owned enterprises, combined with the fundamental policy of strategic adjustment of China's state-owned economy, and, for different types of state-owned enterprise, suggests several specific aspects, in which the regulation should play a role.