On Legal Control Of Executive Pay

After the global financial crisis in 2008, the excessive high executive compensation represented by financial institutions raises strong social dissatisfaction. Executive compensation of China's state-owned and stock company has become one of prominent issues. Therefore, regulations on executive pay should take the Company Law---internizationality of private law, principal-agent theory, human capital theory,Theory of self-dealing, fair value theory as the theoretical foundation, aiming at reducing financial risks, prevents financial crisis, mitigating conflicts among stakeholders and strengthening social responsibilityies. Legal system in our country to regulate executive pay system is imperfect with couples of problems:difficult to achieve unified performance measures; serious insider-control problem; less than full disclosure of executive compensation information; non-market executive compensation; lack of judicial relief mechanism and approaches.To solve those problems above, experience from the United States and Japan to regulate executive pay should be referred to, which are the typical representatives of the common law and the civil law. In addition, the legal system to regulate compensation system should be further completed. It is also necessary to establish mechanisms to realize the compensation correspondence with performance and risk control. And human capital should be adopted into the scope of executive compensation. Moreover, it should take duty expense monetization as the direction of the implicit income of executive; it also should improve the legal system for executive compensation disclosure and sstrengthen the play of corporate governance in the option role, as well as give full play of the shareholders, board and supervisors in executive compensation regulation role. Furthermore, to strengthen and improve tax and market is indispensible.