The External Fairness Of Executive Compensation,Non-pecuniary Compensation And The Performance Of Compan In The Financial Industry

With the publication of the annual salary of executive in the2007annuaI report, the chairman Ma MingZhe of China Ping An insurance company got more than60million for the annual salary. The disclosure of this information caused widespread concern in the executives’ salaries of the financial industry. This is not only about company’s agency costs, but also about the issue of social equity.According to the Chinese survey report of executive salary in all industries, the financial sector has been tied for the first place in recent years. Wind data shows that the executives had the highest pay in the financial sector and lowest pay in the agriculture sector. Compared with the average pay of other industries, the executive’s salary of the financial sector is seven times.The government work report in2010indicated that the guiding ideology of China’s economic and social development is from the "priority to efficiency with due consideration of fairness" to "focus on the social equity" stage. Aim to the high executive’s salary of the financial sector, the Ministry of Finance has issued a series of policies to govern this situation since2009. To force more effective control, the CBRC issued "The regulatory guidelines of the pay in commercial banks".In the context of "Salary limit order ", the thesis researches the relationship between the external fairness of the executive’s salary and the non-pecuniary compensation by establishing the analysis model. On this basis, further study is about the effect of the external fairness of the executive’s salary and the non-pecuniary compensation for the performance of the company. From the perspective of the interests of the company, the paper explores the effect of the salary control for the financial sector. Through the data collection and model analysis, we can get the following conclusions:(1) There is positive correlation between the executive’s salary and the non-pecuniary compensation, which supports the theory of the Owner of the virtual bits.(2) The external fairness of executive salary has no significant relationship with the non-pecuniary compensation.(3) Although the policy which was promulgated by the CBRC in2010links the pay of executive with the level of risk management, the analysis of data does manifest the significant correlation between the executive compensation and the financial leverage of enterprise.(4) The incentive way of executive compensation is signal, especially, the lack of the use of equity incentives such as long-term incentives.(5) There is a tow-way positive correlation between level of executive monetary compensation and the performance of company.(6) The external fairness of executive salary has significant negative correlation with the level of executive salary, which is due to the salary control of the financial sector.(7) There is a negative correlation between the non-pecuniary compensation and the company performance. This result demonstrates that the non-pecuniary compensation has negative impact on corporate performance, although the correlation is not very significant.Finally, on the basis of the data analysis and empirical results, the paper provides seven suggestion for the system of executive compensation incentive and the pay control of government in the financial industry. Meanwhile, the thesis also points out the deficiencies and the future research direction in the end.