The Research Of Board Characteristics And Executive Salary

Because of the separation of proprietary rights from management rights, many scholars has begun to research on agency cost, producing the agency theory. Jensen and Meck-ling(1976) are the two typical representatives in this area. The theory of agency cost has become one of the hot spot of the study, due to the significant affections of agency cost to financing policy, investment policy and corporate value. As one of the cores of the corporate governance, the board can not only influence the agency cost, but also can deal with the problems of the agency cost to some extent. At the same time the research on the executive compensation has become one of the hot spot of the study.At the very beginning of PRC, the Private Enterprises could only existed in the style of the individual economy. To some extent this kind of existence has got in the way of the development of our Private Enterprise. From the very beginning of the opening and development. The individual corporations have become one of the important parts in our economy. At the same time the individual corporations has been valued and developed very quickly, which largely promoted our economy to a large extent.In terms of the basic principles of corporation management, Company Achievement has positive correlation with executive salary. But in recent years this correlation has been weakened much. At the same time there is a huge difference between different positions and companies. Obviously the salary in the real estate companies is very high. In our country the ideal corporation management can make a big contribution to the development of our companies. As the core of the company, the board can make decision on the supervision and policy making which lead the operation. If the listed companies can make salary policy in terms of company achievement, the moral risk can be prevented. In order to achieve this result, the individual directors have been introduced into the board to supervise the company. This paper makes use of the date of our companies to analyze the relations between the board and executive salary.First in terms of domestic situation and foreign situation this paper summarizes the research of the pioneers. From the summarization we can see that these researches have not achieved the same conclusion which gave us the energy to push the research forward. Second the paper begins to introduce the theoretical knowledge in the order of board characteristics and executive compensation. The first theory is divided into board behavior, board independence, incitement and profession. The second is divided into optimal salary bargain and management rights.In the area of board behavior characteristics we believe that the frequency of the board meeting and the attendance are two important factors. We divide the board meetings into regular meetings and ordinary meetings. We can see the executive efficiency through the situation of the board meeting. The relation between the frequency of board and corporation achievement can be effected from this. The independence of the board can be most promoted through the introduction of independent directors. We believe that the executives can make the biggest effort they have if the salary they have been paid satisfies them. Regrettably there are not many companies in China to use long-term salary system to promote the executives and there are not many punishment behaviors in the operation of our companies.After the theory explaining, this paper analyzes the conditions of the executive salary in our listed private companies. We find that the salary of high executives is low; the welfare is very high when the executives are in the position but is very low after they retire. We analyze 372 listed companies in terms of the number of individual directors etc. We find that the departure of chairmen of the board and general managers is very common, which effectively prohibited the self supervision. In the research on the board meeting statistics we find many companies attach great importance to the function of the board meetingIn the former analysis we come up with the empirical assumptions and then begin the econometrics researches. After that we find that the size of the board independence of the directors and frequency of board meeting positively correlate with salary. Finally we suggest that the companies should satisfy the profession and ability and narrow the size of board in order to reduce the lifting phenomenon. Also the companies should increase the sense of responsibility of every member in the board and increase the effectiveness of the board in order to make good policy on the salary. The salary and stock option are two effective ways to promote the performance of the company. In the company system the work between the chairmen of the board and the general manager should be separated. In the end the performance of the board is significantly affected by the frequency of the board meeting and the attendances.