A Study For Executives Under The Authority Of The Executive Pay And Performance Sensitivity

In2007, by the U.S. subprime mortgage crisis triggered a global financial crisis, in the crisis in the financial sector has been a lot of accusations, also exposed a lot of problems, imperfect corporate governance, the company risks not well controlled, supervision executives in place, in which the results do not match the huge executive compensation issues is impressive, been criticized by many people. Bonuses from U.S. financial institutions on Wall Street, Merrill Lynch, Lehman Brothers’ golden parachute to Chinese financial industry Ma Mingzhe astronomical salaries, the phenomenon of zero pay more criticized. So many high executive pay example, one can not help wondering:so many executives really amazing remuneration packages because the company adds tremendous value or earn a significant amount of wealth for shareholders, but the fact that on many high-paying example will hint executives using power to get higher in the company in favor of the shadow of their own remuneration Although the European and American developed countries including the United States, then Britain and China for financial industry executive compensation introduced restrictions, but the crisis prompted many scholars study again again on executive compensation incentive problem.The power of management theory as an emerging theory evolved from agency theory and based on the theory of optimal contract, has a good guide for pay research. Scholars to manage power theory, the research has come to the conclusion:to have a positive relationship between the executive power and executive compensation; executives under the authority of the executive pay and performance has not weakly correlated positively correlated relationship. Institute for the industry basically does not include the full financial industry, only between pay and performance studies for the banking industry, This article by large fluctuations in the performance of the financial sector after the financial crisis, starting from the point of view of the theory of management powers study of executive pay status.43listed companies in the financial sector, this paper by selecting the Shanghai and Shenzhen from2007to2011Annual Report, which removed the Annual Report of the default of11listed companies, and finally finishing the panel data of32annual reports of listed companies in the financial sector The object of study.The empirical study found, in the financial industry listing Corporation, executive power and executive compensation is significantly positively related to that, by executive power function can improve executive pay levels. The effects of executive power, executive compensation and corporate performance has a weak positive correlation, shows that in the financial industry listing Corporation as long as executive power, executive compensation is not true according to the company’s performance and development, but also through further study found in the executive’s pay performance sensitivity to a certain extent, and increase profitability the more high, and the decline in performance sensitivity lower loss, higher performance than the reward executives for obtaining performance penalties, this explained financial executives large compensation phenomena to a certain extent.Finally, according to the research, put forward the following suggestions:first, establish reasonable compensation mechanism of contract, the first is to establish a reasonable performance evaluation system; secondly, to design a reasonable remuneration package, compensation should not only include the monetary compensation, but also to join the appropriate proportion of the equity incentive plan; thirdly, to improve the independence of the board of directors the increase in the number of independent directors, the board of directors, improving the proportion of independent directors, to increase its discourse right, promote the board design more rational compensation; finally, for executive compensation legislation, provide guidance for the direction of financial listing Corporation hire executives and formulation of executive compensation contract, guarantee the effectiveness of compensation contracts, incentives to fully management can play.