The Research Of The Internal Pay Gap’s Effect On Company Performance In The Central Government-led Listed Company

The NPC (The National People’s Congress) and CPPC (The Chinese People’s PoliticalConsultative Conference) were held in Beijing in March2013. According to theinvestigation of the People’s Daily and People’s Daily in2013, the political culture of theMinistry launched a large-scale network "Ten hot Surveys", the distribution of incomeranked second. The continuous expansion of the income gap especially the centralgovernment-led company’s pay gap has aroused the attention of the public. As the drivingforce to promote China’s economic development pattern and social civilization andprogress, how to make the scientific and rational pay system to enhance the centralgovernment-led company’s corporate governance is very worthy of further exploration.Most of the existing research was focused on the relationship between the level ofexecutive pay and corporate performance. The research of the pay gap between executivesand employees and corporate performance is relatively small. The research about thecentral government-led listed company is almost blank. With the data of the centralgovernment-led listed company from2010to2011, based on the pay system environmentand the status quo of the pay gap in the central government-led listed company and the paygap theory, we analyze the applicability of the tournament theory according to the specificcharacteristics of central government-led listed company. After that, we do the empiricalresearch on the theoretical basis of the pay gap, trying to figure out the impact its internalpay gap (including executives pay gap and the pay gap between executives and employees)on corporate performance. Besides that, the paper uses company growth as an indicator ofcentral government-led listed company. We divided the data into two groups and do theempirical research to further validate the applicability of the Tournament Theory.The results of the empirical analysis showed that the pay gap between the seniormanagement team, the pay gap between executives and ordinary employees can improve the current performance of the central government-led listed company, which supportedthe Tournament theory. The Tournament theory has become the effective theory which canexplain the relationship between the internal pay gap and company performance of centralgovernment-led listed company.