A Study On The "Lucky Compensation" Of The Executives Of The Listed Companies

With deepening of the income distribution system reform and improvement of corporate governance structures in China, the compensation system for listed company executives has nearly formed. According to the classic principal agent theory and motivation theory, the compensation is a contract system established from the angle of maximization of shareholder benefit to encourage executives to work hard. To generate effective incentives, the compensation of executives should be linked with their performance. However, the performance is affected by many luck factors including macroeconomic situation and the prosperity degree of the industry, suggesting executives are paid for luck, which is against the initial goal to set the compensation.With lucky pay as the research object, the thesis attempts to completely sort out the problems to pay for luck based on both theoretical and empirical research.Theoretically, it is argued from the aspect of maximization of efficacy of executives and shareholders, respectively. The thesis establishes the model of lucky pay, and indicates that luck is not the determining factor, and has the characteristic of uncontrollability, suggesting the existence of luck risk, making the executives not expect to receive the luck compensation. Even under the condition that executives are able to hedge against the risk, they have no enough motives to pursue luck compensation, and shareholders will not offer executives the compensation without incentives. The essential reason for the existence of luck compensation is its asymmetry, in addition to that executives have some control over the compensation, enduing luck compensation with inertia of upward and rigidity of downward.Practically, the thesis first broadly demonstrates the existence and asymmetry of luck compensation through comparing the data of 2000-2013 laterally and vertically, and then draws a more convincing conclusion based on the panel data of 2010-2012 using regression analysis with two-stage least squares method, that is, executives receive luck compensation, and companies pay the compensation more dependent on luck than performance and effort. Not only that, the increasing of compensation received by executives due to good luck is much larger than the decreasing due to bad luck.Finally, the thesis provides some practical suggestion based on theoretical research.