The Influence Of Internal Control Quality On Executive Compensation

As internal control has become a worldwide public implementation of the supervision of the management system, our country also gradually paid attention to the construction and management of internal control system. Since the 2006-2010, our country have reported more file about internal control, marked the standard system of internal control was perfecting in our country from now on. Now, the listed company of our country has established the basic framework of internal control, but has yet to form correct understanding of internal control. Some executives mistakenly believe that internal control is a kind of restriction to the development of enterprises, and the limitation on the enterprise operating flexibility, so they ignored the construction of internal control intentionally. Or some managers think that the relevant laws is the perfect internal control system, so they do not reach the designated position on the execution and implementation, making internal control becomes a mere formality and superficial, eventually lead to the internal control system can’t play its role. This paper argues that the reason about that internal control quality can not be improved is management do not value. Internal control is ultimately performed by humans, so how to make the executive actively to carry out the internal control within the enterprise, the most direct way is to include internal control effectiveness in executive compensation system, For that the effective operation of internal control is not only an important responsibility of the senior executives, but also closely related with their own economic interests, so it can motivate executives to perform internal control better under the dual role of the pressure and power, and play its important role in enterprise.This paper is based on the principal-agent theory, salary incentive theory, asymmetric information theory and other related theories, using regression methods, deeply analyzed the relevance among the effectiveness of internal control and executive compensation. we have selected 425 listed companies of 2011-2013 in Shenzhen stock, examined the influence, eventually reached the following conclusions:(1)The efficiency of enterprise operation will have significant positive influence on the Executive compensation;(2)auditor opinion have no significant positive impact on the Executive compensation;(3)following the laws and regulations will have significant positive influence on the Executive compensation;(4)Compared with the non-state-owned enterprises, The efficiency of enterprise operation and following the laws and regulations has more significant influence on the Executive compensation; and auditor opinion have no significant positive impact on the Executive compensation no matter under what kind of property rights system. Finally, on the conclusions of this study, it is proposed to improve internal control measures to promote the effectiveness of internal control.