An Empirical Study Of Factors Affecting Enterprise Performance Based On Fairness Preference

Since2005, the government requires companies to disclose annual reportsincreasingly detailed and standardized resulting in executive’s huge salaries continue tobe exposed by the mass media, and causing public outcry. Then more and more scholarsthinking about measurement problems of executive pay incentive, whether the hugeexecutive pay can inspire executives and employees morale on the earth? Or creating asense of unfairly negative impact on general staff? What factors can influence corporateperformance? How to improve business performance? How to set up the pay gapbetween executives and ordinary employees?In the paper, based on the panel data of listed corporations in China from2005to2011, the relationship between the compensation gap of the top management andcommon employees and the operation performance is analyzed empirically. It is foundthat the influence of compensation gap on operation performance appears inverted Ushape. Before the extreme point, the bigger compensation gap, the better operationperformance, while beyond the extreme point, the bigger compensation gap, the worseoperation performance. Moreover, it is found that many factors such as firm size, theaverage age and sex ratio of the Directors, Supervisors and Senior, the number of allemployees, the total number of executives, directors and managers’ two grades one, thenature and location of ultimate owner, etc. can affect operation performance to avarying degree.In order to distinguish different types of manufacturing enterprises’ pay incentiveproblems, this article divides the total sample for four sub-models constructed curvemodel of country-owned manufactories, non-country-owned manufactories, developedareas and underdeveloped areas of manufacturing oriented enterprises. Then it is foundthe extreme points of the developed and non-state-owned corporations are bigger thanthose of developing and state-owned corporations, by which higher compensation gapmay be accepted. In addition, the evidence also found that few companies of all types ofcompanies exist excessive incentives, particularly evident in developed areas andnon-state-owned manufacturing enterprises, and therefore, to strengthen these excessiveincentives manufacturing enterprises’ compensation regulation is imperative.Meanwhile, the vast majority of manufacturing enterprises are in a state of lack of incentives, incentive pay cannot reach the extreme point, so the domestic governmentneeds to increase efforts to encourage internal incentive pay.