Compensation Dispersion In The Executive Suites And The Company Performance

Since the economic crisis, the academic community and the public media has paid the growing attention to the executive compensation for the penomenons of the the executive's pay increase while the overall performance decreases and some significant astronomical executive pay. So far, academically, the research on the income gap between managers and employees is quite thorough in and abroad China while issues of perspective on the pay gap in the executive suites are few. Because of the difference in human capitals, positions and levels of personnel scarcity, the pay gap is somewhat reasonable. There are two relevant contrary basic theories: the tournament theory suggests the expanded pay gap for the necessities of rewarding the winner CEO and the behavior theory supports the compressed pay for the sake of pay equity. Others such as the team player model and the reward to entrepreneurship model, are some of the amendments to the previous theories. This paper makes studies on enterprises in Jiangsu Province of China, explores coefficients between the executive pay gap and company benefits, in order to offer a practical guidance to other companies. Results indicate that the two variables are consistent with the operation of tournaments, which means the compensation dispersion is conductive to improve the company performance, and has not yet reach the negative effects. In addition, this paper uses the enterprises themselves factors, governance factors and external environmental factors in three aspects as follows: the state-owned enterprises have small pay gap than private enterprises shows the cognition of equity is serious in state-owned enterprises; high-tech enterprises have small pay gap than the traditional enterprises, indicating high-tech enterprises highlights internal cooperative other than competitive; Finally, part-time general managers exist in 30% of the overall listed companies, and the relatively large gap between executive pay also verifies that the managers will use managerial power for their own interests. However, on the one hand, many factors affect performance, executive pay gap is only one aspect; in the other hand, the impacts of executive pay gap are many. This study, seemed rather simple, based on the Chinese mainland, using listed companies in Jiangsu Province as the research subjects, expecting for a meaningful exploration.