The Impact Analysis Of Board Characteristics On Chinese Listed Companies’ Top Executive Compensation

Fair and reasonable salary system is one of the important factors for anycompany to long-term development and growth, and it is also a problem thatexecutives and ordinary employees are concerned about. However, in recent years, thedifference of increasing or decreasing degree between senior executive compensation(SEC) and firm performance in listed company is very obvious, so that SEC becomethe focus of the public media again. As the decision institution of SEC, theeffectiveness of board of directors has great influence on the level of SEC. Therefore,what kind of board governance is effective and whether the characteristics of boardgovernance model will affect SEC of listed company in China.China’s listed companies have the different characteristics when compared withthe listed companies in foreign countries; the particularity of board governance inChina will affect firm performance and SEC. In the paper, the characteristics of boardof directors mode of international mainstream are comparative studied, and then, thecharacteristics of board of directors mode of China are analyzed through usingtheoretical and empirical analysis method. Suggestions and countermeasure forimprovement are proposed. The study provides guidance for optimization of boardgovernance mode of listed companies and restriction senior executive compensationeffectively.In the paper, the listed companies in China are regarded as research object, andboard characteristics are taken as the breakthrough point. The correlation betweenboard characteristics and SEC is studied. The board characteristics variable considersdirector board size, board composition, the setting of board leadership and specialcommittee. Based on empirical analysis,3612samples from non-financial listedcompanies of Shanghai and Shenzhen stock market are selected during2010-2011.The relationship between board characteristics and SEC in various industries isanalyzed by regression analysis. While, in the sensitivity analysis, firm performanceand board characteristics variable cross product is brought in to reflect the impact ofboard characteristics variable on the pay-performance sensitivity.In the paper, the main conclusions may be listed as follows:(1) in thecomparative analysis of the industry, board governance of listed companies of agriculture, forestry, animal husbandry and fishery industry do not play its positiverole in senior executive compensation. Meanwhile, in the excavation industry,communication and cultural industry and manufacturing, board of directors play itspositive role.(2) The sensitivity analysis shows that board size and pay-performancesensitivity are an inverted U-shaped correlation, And the optimal size of the boardshould be set in the vicinity of9. In the listed companies, in order to enhance thepay-performance sensitivity, effective checks and balances on the executive powersand executive compensation, some measures are suggested including reasonablestandard board size, increasing the proportion of independent directors, setting perfectspecial committees and selecting the leadership structure of the two roles separation.