The Empirical Research On Impact Of Managerial Power Of State-owned Companies On Executive Compensation

Along with the separation of ownership and management of modern companies, theclient who is outside of the company has the right to claim the residual value and desire tomaximize profits, while agents who control the company decision-making power pursuit ofmaximizing their own salaries, which led to the agency problems of asymmetricinformation, unequal responsibility and incompatible excitation. The executivecompensation system is generally regarded as an effective mechanism to alleviate thisproblem, and the research on executive compensation has also been the focus of academia,which core is whether the executive compensation and corporate performance matches. Inthis regard, many experts and scholars think that the enterprise performance largely reflectsthe effort level executives from the perspective of optimal contract theory, as a basis fordetermining the remuneration can motivate executives to act as the goal of maximizingshareholder interests. But, in recent years, studies have found that he company executivesinfluence and even determine their own pay levels to some extent. They has the motive andthe ability to adjust their compensation system, and the abuse of power makes use of theBoard performance of the company fails to pay out salaries, thus further affecting the resultsof the sensitivity of the remuneration.In China, government at all levels of state-owned enterprises and state-ownedenterprises fatherly plot monopoly industries make them given greater powers, while thespecial ownership characteristics of state-owned enterprises weaken the oversight functionsof shareholders’ meeting. And the Board is often manipulated by executives, combined withstate-owned property virtualization and information asymmetry between the two sides,making the executives supervision useless. Also the unreasonable corporate governancestructure of listed companies in China, imperfect capital markets make unfettered executivepower, making executive compensation contract in the development of a strong autonomy.Therefore, the research of management authority and its impact on the management ofpower system of executive compensation is far-reaching, especially for the special case ofstate-owned enterprises, both to improve the company’s pay incentives, to provide a newperspective for corporate governance, while also advancing in-depth reform of the incomedistribution system, in order to provide new ideas of social management. Based on the above content, this paper regards the management authority theory as aguide, the executive compensation and the relationship between compensation andperformance as studies, the study results to research scholars at home and abroad as basis,and defines the concept of executive pay, the relationship between compensation andperformance, the management authority, combining with corporate governance theory,agency theory, optimal the management authority compensation theory and other theoriesput forward hypotheses. This paper measures the management authority with these indexes:ownership concentration, general manager office, two jobs concurrently, the board size, thesize of the supervisory board and the proportion of independent directors, and selects theShanghai and Shenzhen A shares of state-controlled listed companies with2008-2012PanelData, building the management authority model to study the executive compensation andthe relationship between compensation and performance.Through the empirical study, we draw the following conclusions: First, in China’sstate-controlled listed companies, the management authority and executive pay was asignificant positive correlation, the larger the management authority, the higher the level ofexecutive compensation. Second, in China’s state-controlled listed companies, themanagement authority will reduce performance-related remuneration, and the executiveswill use their power to reduce salaries correlation results, the greater management authority,executive compensation on the results of the more irrelevant. Third, in China’sstate-controlled listed companies, the management will reduce the salary of powerperformance sensitivity, and the greater management authority, the more sensitive executivepay and earnings results, the less sensitive executive pay and performance loss. Forth, inChina’s state-controlled listed companies, impact on the performance of the company’sexecutive pay is higher than the degree of influence on the management powers ofexecutive compensation, indirectly shows the current state-owned listed companyexecutives to corporate performance pay system is based. In short, the executives will usepowers for their own personal gain, so this paper construct an effective incentivecompensation mechanism with improving the independent director system, improving theexternal market discipline mechanisms and making relevant recommendations normsexecutive compensation disclosure mechanism.