Study On How Sharehoiders Control The Compensation Of Executive In Company

Part Ⅰof this paper will briefly describe the decision mechanism on executivecompensation.It not only gives us the basic concept about it, but also introduces us who hasthe right to decide the executive compensation, and the standard of the executivecompensation.Part Ⅱof the paper explores the theoretical basis of the shareholder intervention inexecutive pay. It takes the theory of shareholder democracy as a starting point, definingembodiment of shareholder democracy in the executive compensation system from thefollowing three aspects. First of all, shareholders’ freedom of the will. The shareholders canexpress their own points through shareholder meeting. Second, the equal status of theshareholders. The largest shareholders have equal status with minority shareholders, and theminority shareholders have access to express their wishes. Shareholder democracy advocatesactual democracy, and it resolves the inequality virtually through the establishment of relevantsystems. Thirdly, the interests balance between shareholders and executive. The aim ofshareholder democracy is to achieve interests balance between shareholder and management,and promotes both the interests of each other.Part Ⅲ of the paper introduces the say-on-pay. Because of the different social andeconomic environment, each county has its different mode of developing capital markets, andthe executive compensation system in every county has its own characteristics andadvantages.In Part Ⅳ of the paper, through observing the current decision-making process of theexecutive compensation, we can find the poor correlation between executive compensationand company performance. What’s more, the supervisory of shareholders is weakening,andthe interests of minority shareholders is not fully guaranteed. The most important reason isthat the shareholders lose the control of executive compensation, which is reflected bysupervision of shareholders becomes weak. Minority shareholders lack ways to express theirwishes as well as shareholders’ rational apathy. Part IV of the paper suggests the formation of the say-on-pay system in China. First, theauthor analyses the feasibility of the say-on-pay, and show us the specific direction on theformation of say-on-pay. It is necessary that China should adopt binding vote on next year’scompensation policy. Though the vote is mandatory, the say-on-pay gives shareholders choiceto initiate the vote on executive compensation. The say-on-pay system can not be separatedfrom the supporting system, such as, the reform of solicitation of a proxy vote system and theexecutive compensation disclosure system. This chapter also gives us some suggestions onsolicitation of a proxy vote system and the executive compensation disclosure system.