Earnings Components, Top Managements’ Terminal Years And Top Managements’ Compensation

Based on the principal-agent theory, the modern enterprise system, the separation ofownership and the ownership and management rights due to inconsistencies in the interests ofmanagers and owners, the managers in order to serve their own interests "adverse selection"and "moral hazard" problem. In order to reduce agency costs, corporate shareholders isnecessary to develop an effective mechanism for effective incentives and supervision of themanagers. At the same time, the company achieved effective incentive and supervision of themanagers also need to have institutional safeguards. Shareholders in the company set up aboard of directors, the supervision of the operators as well as incentives powers will bedelegated to the directors. Remuneration Committee as the Board of Directors consists of thespecialized agencies of its functions, including the performance of managers to assess thedevelopment and oversight of the executive compensation plan, and at the same timeresponsible for the disclosure and explanation of several key senior management personnelremuneration constitutes the situation, as well as the proportion and reason. Whether theremuneration committee can reduce agency costs through the development and oversight ofexecutive compensation plans, and test the validity of the method.The nature of factors, combined with China’s specific national conditions listedcompany’s property rights in two ways to test the efficiency of the governance of theremuneration committee: to the executives either end of earnings management motivation andmaneuverability accrued cross on executive compensation;cross controllable expenditures onexecutive pay executives any ending with real activities earnings management. Two test toexamine China’s listed companies to establish a remuneration committee executives last yearby adjusting the surplus constitute the executive compensation affect the extent to alleviatethe executives either end of surplus motive. This article predicted Remuneration Committee tobe aware of the management of this motivation and effective intervention in the managementof earnings management behavior, adjust the surplus constituted on executive pay in theformulation of the remuneration of the management last year, the purpose is to ease the finalthe year the earnings management executives, reducing agency costs.The article using sub-annual inspection of the total sample, test whether theremuneration committee over time will strengthen its functions to fulfill efficiency. The studyresults show that: the performance of duties of the Remuneration Committee in China is nothigh. The conclusions of the study also contribute to our understanding of how theremuneration committee to play a the conduction and coordinating role between executivepay and surplus. Finally conclusions put forward some policy suggestions...