Research On Compensation, Political Incentive Of Executives And Performance In Central Enterprises

As the main part of our national economy, central enterprises have occupied a decisive position in our socialist market economy. In recent years, central enterprises’ economic strength have been increasing year by year.In2013,45central enterprises ranked among the fortune500companies released by Fortune magazine. While central enterprises have achieved significant development and amazing breakthrough, the external governance and internal governance environment they faced have been changing. Corporate ownership structure determines the existence of double principal-agent relationship of executives in central enterprises, which leading to the absence of supervision, asymmetry of responsibility and other problems. For a long time, government’s intervention in central enterprises’ normal production activities makes our manager market develop at a snail’s pace, as a result, executive incentive mechanism is in urgent need of improvement. In2008, US subprime mortgage crisis swept the globe, at the same time, compensation in central enterprises attracted attention of all walks of life, especially of government. Besides, executive position itself is a certain administrative level, which makes executives connect with government inextricably, in this respect, the appointment of central enterprises’ executives often serves as a method of political incentive in addition to compensation. Consequently, the effect of current incentive mechanism causes the attention of all parties.In this context, it is essential to test the relationship between double incentive mechanism and performance executives in central enterprises, which in order to put forward proper suggestions about incentive mechanism to promote performance.This paper consists of five parts. As the introduction of this paper, the first part mainly introduces the research background, research significance, research methods, as well as summary of the main points of scholars at home and abroad. The second part is the part which presents relevant theories and concept definition. It mainly introduces economic theory of incentive, management theory of incentive and psychological contract theory, which are related to incentive theory. On this basis, the paper defines the concept related to incentive. The third part is theoretical analysis of executive incentive and performance. In this part, firstly it introduces the history of compensation and political incentive of executives in central enterprises. Then through data collection and sorting, it analyzes the status quo of three aspects, including compensation, political incentive of executives, and performance in central enterprises. Finally, it discusses the relationship between compensation, political incentive and performance in central enterprises from a theoretical perspective. The fourth part is the empirical analysis. It at first presents research hypothesis, then it selects the sample data of the listed central enterprises, designs variables and builds multiple regression, and then tests the correlation of compensation, political incentive and performance. Empirical study results show that compensation and performance have significant positive correlation, and political incentive and performance have different correlation according to different incentive method. The fifth part summarizes the research conclusion, and then gives advice and forecasts the future research direction.In this paper, the innovation and features is in two aspects. First is the content of the study, it expands the connotation in research on executive incentive. Now there are few researches on political incentive of executives. This paper fully concentrates on political incentive of central enterprises’ executives and divides it into internal political incentive and external political incentive to study. Two is the empirical approach, on the basis of the introduction of economic value added(EVA), this paper puts return on equity(ROE) and the ratio of economic value added and invested capital as explained variables, and builds multiple regression model to test the relationship of compensation, political incentive and performance. By considering the two incentives influence on new and old performance indicators, research conclusion becomes more stable and reliable.