The Impact Analysis Of Independent Directors' Features On CEO Pay

Independent directors, also known as outside directors and independent non-executive directors, are not listed as other duties in addition to directors, and their existence could not hinder the objective determine between the company and its major shareholders.The emergence of listed companies made the company's separation of ownership and management. The targets of managers and shareholders are not exactly coincided, the operator may deviate from the shareholders for its own benefits. To some extent, this moral hazard or adverse selection behavior could damage the company's long-term development, so the establishment of an effective incentive and monitoring mechanisms can stimulate the enthusiasm of the operators and it plays a vital important role for the company, but it is clear that a fair salary as a key factor can influence their motivation. Theory of corporate governance says the Board of Directors as the center of the governance, one of its core functions is to determine the pay of senior executives. In the past few years, in order to enhance corporate governance standards of domestic and to be line with international advanced standards of governance standards, China Securities Regulatory Commission has issued " The guidance system on the establish of Independent directors in listed companies" and "Corporate Governance Guidelines" and suggested listed companies to establish an independent board of directors consisted of remuneration, nomination, audit and strategy committees, and required the companies should separate the chairman and the general manager in order to enhance the effectiveness of the board of directors.For China's special conditions, such as the restructuring of China's listed companies is not complete, the operations are not standardized, especially the problems of corporate governance structure is more prominent and make the damage to the company's minority shareholders. In this case, it has become more necessary and urgent for listed companies to establish an independent director system and improve the governance structure. But how can the independent directors play on the control of corporate executives pay in the end has become a corporate governance focus of researchers. In this paper, we use Shanghai and Shenzhen A-share listed company's annual disclosure of data to an empirical test, including the proportion of independent directors,the remuneration of independent directors,the attendance of independent directors to board meetings,the consists of commissions of board directors (in particular the Remuneration Committee) and the location consistency of the independent directors with the listed company, which focused on analyzing the impact of the proportion of independent directors and the remuneration of independent directors on CEO pay, and further tested the impact both on CEO pay and corporate performance sensitivity. The article finally gives some suggestions from the strategy and the policy to improve the independent director system and make sure that independent directors can really play its role effectively.