An Empirical Study Of The Relationship Between Compensation Regulation, Managerial Power, Contract Reference Point And Executive Cash Compensation

Gradually spreading global financial crisis and people's requirements and concerns on disclosed information made the research of Executive cash pay and its reflection be the fashion business review over the past decade. Tumbled share prices and continuously expanded downsizing compared sharply with the rising incomes of senior managers, plus the yearly sky-high salary is eye-catching. Although China's senior management incentive system is in the imitation of Euramerican and mature capital market incentive mode, their institutions, legal and corporate governance environment still have impact on it. So, how and to what extent the Executive cash pay in actively reform with those factors will be the main problems is studied in this paper.Based on domestic circumstances, this paper uses 2006-2009 CSMAR data to study executive compensation influential factors of Chinese listed company from wage control, executive rights and contract reference point respectively. Research found that wage controls and Executive cash pay level was inversely related, especially for the state-owned holding company, Executive cash pay greatly got influenced. In other terms of certain circumstances, Executive cash pay level reflects positive correlation with the degree of company two hats one variable and general manager holdings variable which stand for power sources; reflects negative correlation with the board independence, board of supervisors and equity concentration which stand for power restriction mechanism of corporate governance, but not very markedly. Executive cash pay level and external compensation reference point is closely related to its reference point effect, which may be amplified due to the existence of remuneration committee.The results of the study show that state-owned enterprise incentive policies and efficiency might be damaged to some extent due to the existence of salary regulation; general managers who are in higher position of the board of directors or hold high share properties have the ability to get high compensation contracts. However, those corporate governance variables which are supposed to curb executives'rights such as the board of directors, board of supervisors and equity concentration did not significantly explain the statistical meaning of executive compensation change. Reference point effects exist in domestic listed company pay setting process, Executive cash pay rising can be partially attributed to pay remuneration committee making reference to high international counterparts'salary benchmarks in the process of establishing payment.