Legal Research On Executive Compensation Decision-making Mechanism Of State-owned Holding Listed Companies

On account of the absence of the nation as the shareholder, administrative appointmentand dismissal of senior management and agency risk out of multi-layer principal-agentrelation of state-owned holding listed companies, the principal part of senior managementemolument decision-making lacks independence. The most universal senior managementemolument decision-making mechanism stipulated in the Corporation Law has beenalienated in state-owned holding listed companies, and thus unable to exert normalmotivation and restraint.Most state-owned holding listed companies were restructured from state-ownedenterprises, dominating around half of the securities market. Based on policy advantages ornatural resources advantages, majority of state-owned holding listed companies are atmonopoly positions. The company profits contain a large quantity of monopoly profits,which has nothing to do with the operating and managing competency of seniormanagement. At the moment of calculating the main basis (company profits) of seniormanagement emolument, instead of excluding a large quantity of monopoly profits therein,taking the total company profits as the main factor of influencing senior managementemolument decision-making is short of fairness.A majority of state-owned holding listed company senior management are appointedfrom the civil service system in a simple manner of administrative personnel appointmentand dismissal by the State-owned Assets Supervision&Administration Commission or theOrganization Department. However, the identity as state administrative personnel of theappointed senior management does not change due to such appointment; they still preservethe identity as state administrative personnel while working as senior management. Inaddition, the administrative ranking of senior management is an important factor thatinfluences the senior management emolument decision-making. The administrative rankingdoes not have inevitable relation with the gain of company profits; therefore, it is also lackof fairness that the administrative ranking of senior management is a factor influencing thesenior management emolument decision-making.After analyzing the main reasons of the irrationality of senior management emolumentof state-owned holding listed companies, in order to reduce its irrationality, this thesisproposes to divide state-owned holding listed companies into monopolistic ones andcompetitive ones. For the former, senior management emolument decision-makingmechanism shall adopt civil service system; for the latter, the selection and appointment ofsenior management and their emolument level shall all be marketized, complying withmarket discipline. Besides, it is necessary to establish and perfect related systems such as emolument committee system, employee’s participation in senior management emolumentdecision-making system and social professional organizations’ participation in seniormanagement emolument decision-making system, etc.In light of a large quantity of monopoly profits has nothing to with the businessperformance of senior management in state-owned holding listed companies, this thesiscomes up with excluding the company monopoly profits while calculating the importantbasis (company profits) of state-owned holding listed companies’ senior managementemolument. Furthermore, the state administrative personnel identity and administrativeranking do not have direct relation with the performance of senior management, as a result,the administrative ranking factor shall also be excluded while deciding state-owned holdinglisted company senior management emolument.