Executive Compensation、Managerial Power And Outside Information Disclosure

From the establishment of modern enterprise system, management incentive system has been a concern of people. In practice, owners are confused about how to motivate managers; in academic world, scholars are continuing to concern the incentive effect of the management. In reality, there has been possibility of management to enact its own pay. Internal governance more or less is affected by the management capacity. The listed company as a continuous exchange with the external environment resources will also be influenced by outside environment. Through this research, the author tries to inspect the relationship between managerial powers and other existing compensation incentives. Taking into account the sample enterprises are state-owned enterprises, the author also concern the failure of incentive system in SOEs and how the failure happened. This article not only allow policy makers to understand the operating efficiency of the compensation incentive mechanisms, and also let them learn that how management can affect their compensation. After these part, I will also examine the external governance mechanisms-mass media and securities analysts on existing pay incentive failure, but also consider both external governance mechanisms on different sources of power in the management governance role. Through this empirical research, I hope this study can offer policy makers some ideas about how to choose an effective external governance mechanism to improve the phenomenon of different salary failure.I consider the influence of the managerial power upon their compensations based on the listed SOEs in China to show:whether the powers of management will lead to management layer pay-performance decreased sensitivity; whether the power of management will lead the management’s compensation viscidity and whether the power of the management with the exception of salary significant relationship. On this basis, the author will examine the effectiveness of external governance on compensation based on managerial power. I consider the external governance measures refer to the degree of analysts’ attention and media attention.According to this study, when the general manager positions as chairman of the board, the managerial power and executive compensation is significant negative correlation. The power of management will be a significant reduction in the remuneration of the management. If the companies are high concerned by the mass media, the managerial power and the compensation do not show a significant relationship, namely the supervision of the media can effectively inhibit general manager manipulate their own remuneration; However, the analysts’ attention do not work well on this kind of compensation. When the general manager also position as the chairman of the board, the management will significantly enhance their pay-performance sensitivity. With high media attention, when CEO duality, the management can not have a significant impact on their own remuneration; when there are more analysts to express their views on companies, the power-based compensation will not change much. In the case of CEO duality, a significant positive correlation between compensation and performance decline. In other word, when the general manager positions as chairman of the board at the same time, management may exercise their power to improve their own remuneration in the condition of the decline in performance. When the media pay much attention, the relationship between management pay and performance decline is no significant. It is easy to conclude that media attention can reduce the possibility that management use his power to improve their remuneration. The division of the regression results also shows that analysts’attention can restrain the management from improving their power-based compensation.The study also found that the higher the proportion of state-owned shares, the higher the remuneration of the management. Levels of media attention does not change the status quo; the attention of the analysts to the companies also far from work. When the first shareholding ratio is higher, compensation-performance sensitivity is lower. Management uses their power to reduce the correlation between pay and performance, and increase the rigidity of the remuneration. How much the mass media pay attention and the level of analyst attention could not prevent the management from using its own power to reduce salaries-the performance sensitivity when a higher proportion of the largest shareholder, executive compensation and performance decline significantly positively correlated. In the high degree of media attention, executive compensation and performance is still significantly positive. It is said that media coverage can not be used as a external governance to improved compensation viscosity if the proportion of state-own shares is high. In the companies which are followed up by a mess of securities analysts, management pay and performance decline is still a significant positive correlation, which means that the analysts can not work as governance because of the higher proportion of the largest shareholder.When the company has dispersed ownership, management will have greater power, and management as a result significantly upgrade their remuneration. When the media attention pay highly attention to those companies, the management can not use this power to improve their own compensation, which means that the mass media show a perfect governance effect when a company has dispersed ownership. This conclusion also applies to the attention of the analysts. In the case of dispersed ownership, management’s remuneration-performance sensitivity of the results are negative, but not significant; which means that the management do not manipulate the remuneration. Either the level of media attention or the number of analysts who is follow-up a company, this situation does not make any change. When a company is dispersed ownership, executive pay and the decline in performance are positively correlated, but the correlation is not obvious. Namely, when a company is dispersed ownership, a decline in performance will not cut the compensation of the executive. With highly attention by media, there is a negative relationship between pay and performance, but this relationship was not significant. Highly concerned by corporate analyst, the executive compensation and the decline in performance are positively correlated, but not significantly. When in a condition of dispersed ownership, enterprises which are highly concerned, the management’s remuneration may also be boosted. Based on that outcome, the governance effect of media and analysts is no significant when there does not exist a lager shareholder.No significant correlation exists between the duality and the abnormal compensation. The proportion of the largest shareholder has a significant negative correlation with abnormal compensation, which means that the higher the proportion of the largest shareholder, the less probability of abnormal pay is. Dispersed ownership will lead to a significant positive correlation with abnormal compensation, which means that equity is more decentralized, the possibility of abnormal compensation is higher. The probability of occurrence of abnormal compensation increases when a company is both duality and dispersed ownership. Media coverage has very good governance efficiency. The number of a company’s securities analysts does not have any governance efficiency; on the contrary, it will lead higher possibility of occurrence of the abnormal compensation.Through research, we can conduct that various kinds of failure in the incentive system exist in the listed state-owned companies. Through the study, we find the independent directors and the Compensation Committee did not play its role. The author confesses that the effectiveness of the independent directors and the Compensation Committee should be enhanced in the actual corporate governance. The board meetings that the independent directors take part in should be increased and the suggestion which is come up by the independent directors should be reported. Strengthening the responsibilities and obligations of the independent directors is also an alternative. By the way, independent directors should form an independent opinion on the company’s governance structure, and this opinion is liable. Besides those suggestions, the revolution of the governance mechanisms of the Compensation Committee also is very important. It is the board that nominated the member of the Compensation Committee, instead of the executive. Management can not also serve as a member of the Compensation Committee. Media reports has a very significant performance positive influence on abnormal compensation which makes better governance. Namely enhanced media coverage of abnormal pay can reduce the probability of occurrence of abnormal compensation. Therefore, the media can work out the pay-performance gap between the largest enterprises, and release them on the media. After this working, we should contribute to the company’s corporate governance. We can see whether it is reported in the media or analysts’ reports do not work well on the incentive system as the largest shareholder of the country or state-owned enterprises as a result of internal control as a result of failure without any governance efficiency, so we can consider the use other ways to strengthen corporate governance, for example, strengthening information disclosure of the state-owned enterprises or more timely respond to media reports. More inspection of state-owned enterprises should be carried by SASAC to improve the governance of the company.This article provides some opinions and solutions to policy makers. The author hopes this article can offer the governance some appropriate guidance to the corporate governance reform.