Executive Compensation、Performance Sensitivity And The Effectiveness Of Internal Control

Since twenty-first Century Enron, WorldCom, and many other large Multi-National Corporation have spread the financial fraud scandal, the problem of internal control is getting caught. Meanwhile, the outbreak of sky-high CEO pay in China’s listing Corporation, also attracted some sustained attention of the public, academics and researchers.This paper begins from research progress and status of executive compensation and the effectiveness of internal control at home and abroad, analysis on the basis of the principal-agent theory, power management theory, and System efficiency theory. The implementation of the internal control will restrain the self-interest behavior of managers, which helps to improve the company’s performance. Rational managers have pushed company to link Executive compensation to long-term performance rather than short-term gains, to realize their own pay gap. Based on the analysis of the efficiency of the internal control, assumption is given on internal control information and disclosure positively correlated to sensitivity of compensation-performance for top management, in other words, more control on high management, less possible influence of his power on developing compensation-performance. Samples of this paper is2011-2012Shanghai-listed company, and found that the higher degree of disclosure of internal control information, the Executive compensation performance sensitivity is high; Large scale of board of supervisors tend to lower the influence by top executives in executive compensation policy-making; Although the company set up some independent directors, it did not really working.Part of the novelty in this essay is that the control of executive power as an important factor to influence the efficiency of internal control in assumption, we also have adopted some the evaluation index for measuring the effectiveness of internal control.