Research On The Relationship Between Executive Compensation And Enterprise Performance, Corporate Governance Of SME Board Listed Companies

Executive compensation system reflect the overall levels of corporategovernance. The executive compensation incentive is effective or not will have asignificant impact on business performance. For the whole society, executivecompensation levels are reasonable or not will mirror the fairness of the whole socialwealth. Scholars at home or abroad have conducted a lot of research on executivecompensation, and achieved fruitful results, but so far, the research on the executivecompensation of the SME board listed enterprise is limited. Executive compensationis of great significance, as a major component of salary incentive in small publiccompanies. Although part of the enterprises have established up scientifically rationalincentive mechanism, but undeniable, there are many problems still exist in executivecompensation system. Whether the executive compensation level of the SME boardlisted enterprise is reasonable? What’s the relationship between the executivecompensation and the enterprise performance? Does it promote the improvement ofthe enterprise performance? Whether companies draw up salary distribution accordingto the performance of the company? And what is the relationship between executivecompensation and corporate governance? Which factors actually affect executive payincentive? Studying and discussing all these questions above become starting point ofthis paper, trying to explore the answers to the problems is the purpose of this study.Therefore, this article choose the SME board listed enterprises as the sample, toresearch the relationship between executive compensation and business performance,corporate governance in the SME board listed enterprises, to provide a basis forestablishing reasonable executive compensation levels and improving businessperformance.This paper select data from companies listed in SME board of2010, aboutexecutive compensation, enterprise performance and corporate governance structure.Through factor analysis of the many indicators of an enterprise performance, we getthe comprehensive enterprise performance score, which is used as the variable ofenterprise performance. At first using descriptive statistical analysis to study the sample, and compare the2010executive pay level to the nearest four years’. Throughthe statistics analysis we found that the executive pay of the SME board listedenterprises in our country increase year by year, but there are huge differencesbetween different areas and different industry. And then in empirical research, itfound that there is a positive relationship between enterprise performance andexecutive compensation, so the executive pay formulated in the SME board listedenterprises promote the enterprise performance in a certain extent, that means thesalary incentive mechanism play a role. And the executive compensation is mainlylinked to performance indicators which reflect the enterprise profitability, but toenterprise’s operation ability, debt paying ability and ability to develop, therelationship between these performance indicators and executive compensation arenot obviously. Then we study the influence of corporate governance structure andother factors to the executive pay. The research shows that the influence of thecompany governance structure to executive compensation is not significant. Inaddition, we also found that executive compensation has a significant positivecorrelation with the scale of the enterprise, and a significant negative correlation toasset-liability ratio, and the relationship between the executive compensation andindustry, regional are close too. In the last part of this article, we make some policyrecommendations on perfecting the executive compensation incentive system of theSME board listed enterprises, as a reference for China’s SME Board ListedCompanies.