Luck、Corporate Governance And Executives Compensation

Accompany with the produce of "executive sky-high compensation" phenomenon, the rationality of the compensation level of senior managers and the factors that influence the of compensation level of senior managers are always paid attention by the society and many scholars. According to the viewpoint of classic principal-agent theory about the compensation, compensation is a system of contract that is designed to affect the behavior of executives, in other words, compensation is designed by the shareholders, who are as the consignors, to stimulate the executives, who are as the agents, so as to reach the purpose of maximizing shareholders’interests, the design of the executive salary system mainly is used to remission a series of consequences that resulted by the difference between executive and the objective function of shareholders. A large number of studies at home and abroad have confirmed that there is prominent positive correlation relationship between executive pay and company performance, and previous research pointed out that managers may use the power and various channels to seek for their welfare without considering the benefit of shareholders owing. And the recent literatures also suggest that there exists the phenomenon of executives using the rights to conduct rent-seeking and not performance-based compensation such as luck compensation in enterprises. Given luck compensation is not attributed to the category of the performance salary, violates the optimal contract system and is related to the social fairness, therefore, the study that discusses the relationship between executive compensation and luck becomes very important for further designing rational and effective executive compensation incentive mechanism.At the background of constant spread of global financial crisis in2008, the event of Ping An Insurance of China "executive sky-high compensation" led to the public’s query to executive compensation become even more violent. Given the phenomenon of China "executive sky-high compensation", under the background of the special compensation system in China and the development of corporate governance, this paper selects the Shanghai and Shenzhen listed companies between2004and2012as the research samples, uses the empirical study to comprehensively examine the relationship between executive compensation and luck, characteristics of this relationship, and further investigate the regulating effect of the corporate governance mechanism on the relationship, according to theoretical and empirical analysis, the final result shows that:(1) There is a significant relationship between executive compensation and luck, luck can generate an obvious significance on executive pay, there exists luck compensation in executive compensation;(2) The relationship between executive compensation and luck presents the characteristic of asymmetry, in other words, the increment of the executive compensation when executives face the good luck is greater than the decrement of the executive compensation when executives face the bad luck;(3) According to testing the regulating effect of corporate governance mechanism on the relationship between executive compensation and executive luck, this paper finds that the share proportion of the largest shareholder, board size have exert weak and no significant negative regulatory role. And two part-time of the chairman and general manager has not notably increased the relationship between executive compensation and luck, which illustrates the rule that chairman and general manager should not be one man has exerted its effect. However, this paper finds that, the proportion of independent directors not only can’t reduce the luck ingredient of executive compensation, but also enhance the relationship between executive compensation and luck. In addition to these, this paper initially finds that the correlation coefficient of executive compensation and executive luck in the listed companies of central and western areas is greater than the correlation coefficient of executive compensation and executive luck in the listed companies of eastern areas, the result illustrates that, when executives luck rises, the increase of executive compensation of listed company in the central and western regions is greater than the eastern region.Aiming at the above research results, the main contribution of this paper lies in the following aspects:firstly, according to confirming there exists luck element in executive compensation of listed companies in our country, namely exists the non performance pay, confirming the asymmetric relationship between executive compensation and executive luck, to some extent, this paper effectively illustrates the reason of the occurance of "executive sky-high compensation" under the negative circumstance of financial crisis. Secondly, by examining the regulating effect of corporate governance mechanism to the relationship between executive compensation and executive luck, this paper finds that the listed company governance mechanism in China has not played a good control effect for the non performance compensation in executive compensation. At last, aiming at the questions that exist in the adjustment role of governance mechanism to the non performance salary of executive compensation, this paper conducts in relevant illustration, and further imposes a series of measures to perfect the governance mechanism, which includes the aspects of adjusting the ownership structure, enhance the independence of the board and independent director, improve the professional and enthusiasm of the independent director.