The Compensation Gap Between Executive And Average Worker: Evidence From Listed Companies

It has been widely concerned that China’s income gap has risen significantlyduring the past three decades. While existing research is mainly based on householdor individual level data, we use data of public listed companies and focus on thecompensation gap between executive and average workers. This paper assesses therelationship between the compensation gap and factors like the ownership, corporateperformance, etc. and we also compare the compensation gap in different countriesand regions by case studies.We find that the compensation gap has been rising significantly for the past tenyears. In2001, the executive compensation was4.7times as the average workersalary but this number rose to7.9in2010. Different industries have differentchanging trends in the gap, but most industries have risen dramatically except for fewindustries like the electricity, the construction and the transportation industry.As expected, compensation gap in the state-owned enterprises is lower than thegap in the non-state enterprises. And companies with better performance have highercompensation gap. As for other factors, company size and largest share holding rateare negatively related to compensation gap. On the contrary, employee number,capital intensity, independence of the board and share holding proportions of themanagement are positively related to the compensation gap.This paper also uses difference in difference model to identify the policy effectof some government documents in2009. The results show that the effect is notsignificant. Apparently, those documents were only government instructionalopinions.