Analysis Of Judicial Review Approach To The Issue Of Executive Compensation In The Context Of Inclusive Growth

Executive compensation is not only a topic related to a company, but also a significantlyinternational issue about social distributive justice. With the financial crisis, people in growingnumber begin again to attach importance to executive compensation issues and inclusive growthmechanism. After examining two alternative approaches to the issues of executivecompensation--the optimal contracting approach and the managerial power approach, it draws aconclusion that managerial power and board structural bias play a significant role in makingexecutive’s outcomes well deviate significantly from optimal contracting. Under the rationaldecision-making paradigm, the traditional fiduciary duty and judicial accountability is runninginto a dilemma to the issue of executive compensation: The faithful duty standard is too rigorousand the duty of care standard is too loose. The paper holds the view that the procedural justice isgetting out of control of self-dealing in executive compensation，and”substantive rationalitystandard” is enforce to settle the managerial power approach. While enhancing executivecompensation transparency is the basis, it is of pressing necessity to segregate such conflict ofinterest by overcoming the directorate’s structural bias through the adoption of duty of good faith.The AGM’s prior monitoring shall aim at the executive compensation policy and long-termincentive scheme, and the shareholder’s post monitoring through shareholder proposal andderivative action shall be put into place. Exploring into the judicial review approach to the issueof executive compensation in the context of inclusive growth, the paper will attempt to givesome scientific advice to answer the failure of executive compensation.