A Study On The Relationship Between The Characteristics Of Independent Directors And The Sensitivity Of Executive Salary Performance

Executives’ compensation incentive is always a key problem in the corporate governance of state-owned listed companies, the efforts of the executive and entrepreneurship directly decides corporate performance. However, executives equity incentive is not common in state-owned listed companies of southwest, incentives are relatively single, monetary compensation is still the main mode of incentives of SOE executives’ performance rewards. In the incompletely SOE managers’ market, SOE executive compensation is not completely in accordance with market standards, which may produce unfair and unsatisfied feelings. And then go against the clients’ wishes and encroach on the company and shareholders to maximize their own interests with the information advantage to take rent-seeking behavior. And it will cause principal-agent problems.The introduction of independent directors can make proper supervision and restraint effect. In the process of its participation in the board of directors can identify executives’ opportunism behavior. They can curb the principal-agent problems in time according to their own questions and voting objection. To a great extent, it increases the risk of illegal executive maximum compensation and opportunity cost, which promote the executive to make the greatest efforts, and improve their compensation performance sensitivity. However, due to the short period of independent directors introduced in our country, and as its low proportion, it is difficult to play the expected effect in corporate governance. Therefore there are some sayings that the independent director is the director of "vase" or the "rubber stamp" in academia.According to this, we do the research of an empirical study of A-share listed state-owned enterprises in the southwest. And we come to the conclusions that the independent director is not as some scholars have said in academic circles that they are just director "vase" or "rubber stamp", but they do make a difference in improving executive compensation performance sensitivity. Specifically, the greater the proportion of independent directors in directors of the board, the greater power the independent director team can gain in decision-making and supervision. The more male independent directors in the team, the more likely they give outspoken talks on executives’ behaviors. The greater the proportion of independent directors with professional titles, the more likely they can give accurate judgments in regulation, identify executives’ behaviors and motives. The longer tenure they stay in the enterprise, the more possible independent directors can form a good and executive behavior of the enterprise knowledge experience. It can not only help independent directors to make accurate judgment quickly when possible problems arise, but also can appear form the knowledge of prevention and early warning mechanism before problems arise. Thus it becomes the "measuring instrument" of executives’ activities. The more attendances the independent directors have, the more chances they can participate in the major issues of the enterprise(e.g., compensation scheme). They can make executives fear of the risk and reduce their opportunism behaviors by putting forward suspicions and voting objections.This study also found thinking inertia and institutional ills in the selection and incentive mechanism of directors in the listed state-owned enterprises. And the executive incentive form is very single. Therefore we put forward the advices that to improve the executives’ incentive forms, rearranging the selection and appointment of independent directors and incentive system design. SOE can truly realize the independence of independent directors, and they can promote executives’ compensation performance sensitivity by positive and effective incentive and supervision, which, in turn, can improve corporate governance.