A Research On The Influence Of Compensation Gap Among Senior Executives Over Small And Medium-Sized Enterprises’Growth From The Perspective Of Managerial Power

Senior executives, i.e. high-level administrators of enterprises, usually lie inimportant positions in the enterprises and own the operation power anddecision-making power. Therefore, TMT management is the basic of corporategovernance which can be reflected by enterprise’s growth most directly andeffectively, so companies need to set feasible incentive mechanism of executive’sremuneration in order to improve the capacity for sustainable development, createmore wealth and attract more investors. But many Chinese enterprises expand theTMT compensation gap continually for the purpose of stimulating the top managers’enthusiasm, this phenomenon leaves so many question marks on whether theexpanded gap will reach the anticipated incentive effect， achieve the aim ofmaximizing the interests of shareholders, and benefit for the enterprise’s long-termdevelopment. Thus it is much more important and urgent to discuss the rationality,fairness, corresponding results, contributing path of the compensation gap amongsenior executives and the possible policy guidance in its present stage.Since the decisive role of Small and Medium Enterprises in the nationaleconomy has made the problem that how to keep them develop and growcontinuously and steadily become more and more crucial, and in recent years the greatcompensation gap among senior executives has become common in SME, this paperbases analysis on the balanced panel data of130SME from2008to2012, combinesthe theoretical analysis with empirical analysis, takes the Behavior Theory, theEndogenous Enterprise’s Growth Theory and the Managerial Power Theory as thefoundations, brings both the absolute gap and inequity of the difference which ismeasured by coefficient of variation into the research system, and explores the impact of the TMT compensation gap on enterprises’ growth as well as the role of managerialpower played in the aforementioned relation.The results of the empirical study show that either absolute gap or the inequity ofthe difference has significant negative correlation with the companies’ growth, andmanagerial power, being proved as a semi-moderator, has significant moderatingeffect on the relationship between TMT compensation gap and enterprise’s growth.This paper demonstrates that SME should keep the compensation gap in a reasonablescope, which can be achieved by giving consideration to both incentive effect and theequity of the gap, and should avoid the adverse effects of managerial power indesigning compensation system by way of perfecting the inner corporate governanceand enhance the transparency of compensation so as to guarantee the enterprises’growth.This paper explores the influence of compensation gap among senior executivesfrom the perspective of managerial power, which lends theoretical support to thereform of the TMT compensation system. And including the inequity of the differencein the research is helpful to investigate the influence of the gap on companies’ growthas well as the influence mechanism. What’s more, this paper focuses on real life,which will provide guidance for designing the effective Incentive Mechanism of TMTand formulating the rational compensation gap from the perspective of enterprise’ssustainable development. Finally, this paper finds that the key point of influencing thegap is the managerial power, which has guiding significance of establishing andperfecting effective corporate governance structure.