A Study On The Executive Compensation Of Minsheng Bank

The compensation incentive mechanism of executives, who are workingfor Chinese listing commercial banks, haven’t reached the reasonable state for a longtime. Short-term incentive compensation, scilicet pay-for-performance reaches morethan60percents of gross salary. While the proportion of long-term incentivecompensation is smaller, the intensity of long-term incentive is insufficient, andmotivational tool is single. Existing paying system is lack of effective incentives andconstraints, causing the failure of the bank executives incentive and restraintmechanisms, leading to short-sighted behavior of the managers and the brain drain,damaging the Bank’s long-term interests, affecting long-term development of banks.In the context of accelerating internationalisation process, the most urgent task ofChina’s banking industry is to strengthen the research about talent incentivemechanism, especially executive compensation incentives, to retain the good seniormanagement in the talent competition with foreign banks.The paper takes Mingsheng Banking Corp., Ltd. as example, analyzing internalsalary structure and external peers circumstance, to study the current situation ofMinsheng Bank’s executive compensation incentive. Selecting several relatedindicators about the level of profitability, risk control and the value of the company,in-depth analyzing the influence of executive compensation over the performance ofthe bank. Comprehensively summarizing the defeces within Existing executivecompensation system of Minsheng Bank: the structure of executive compensationmainly are short-term incentives, while lack of long-term incentives; the paying gapof internal executive level is too large, the distribution system is unfair, and theremuneration structure is unreasonable; the level of remuneration for seniorexecutives is lack of connection with banking risk, easy to lead to short-sightedbehavior and moral hazard.In order to optimize the executive compensation system, and improve theincentive effects of executive compensation, Minsheng Bank should proceed fromtheir own deficiencies in the system. Taking reasonable improvement within theexecutive paying structure, gradually establishing a long-term incentive mechanism,and establishing executive paying incentives linking to the risk at the same time.Improving the system of executive compensation from the perspective of risk adjustment. Minsheng Bank also needs to think about how to build a evaluationsystem of comprehensive executive compensation performance from the overallperspective. Departuring from the liquidity, profitability and safety of bank to makecomprehensive assessment, operating performance of the executives, and theindividual and overall operating level included in the personal scope of examination.While government needs to improve capital market environment and relevant policiesto make the external environment better. Ultimatly realizing the target of improvingexecutive compensation incentive system of Minsheng Bank.