The Study Of Relationship Among Managerial Power, M&A And Executive Compensation

In recent years, the problem of executive compensation has becoming adiscussing heated and controversial topic. According to optimal contract theory ofexecutive pay. Shareholders can sign executive compensation contracts based onbusiness performance, The contracts can encourage executive work more effective.Executive compensation is a mean to alleviate agency problems. However, a largenumber of empirical studies have shown that there is less correlation betweenexecutive compensation and corporate performance.Compensation does notnecessarily solve the problem of agency, the formulation and implementation ofcompensation mechanism can make itself become a part of the problem of agency.Therefore, Bubchuk and Fried put forward managerial power into the theory ofexecutive compensation management framework.This article is under the guidance of management power theory,based on theagency relationship in China’s monopoly industries, with14monopoly industries,188panel data of listed companies as the research object from2008to2010. In this paper,the main conclusions are as follows:1.The executive compensation is significantlyrelated to the management of power.2.Under certain conditions,the greater themanagement power, the more likely it is to promote mergers and acquisitions forenterprise. The improvement of management compensation is one of the importantmotivation of enterprise merger in, and as a result of the existence of principal-agentproblems, M&A is not based on its shareholder interests angle, but their own interests.3.Other conditions in certain circumstances, the greater of management power, theM&A happened more frequently.4.Other conditions in certain circumstances,thegreater of management power, the more likely to promote large-scaleM&A.Management power, the greater the executive pay is higher, the managementby increasing the number of mergers and acquisitions to boost their pay.5.Otherconditions in certain circumstances,the greater of the the managementpower,executives can promote mergers and acquisitions to obtain more executivepay.6.The greater of the management power, the higher of the executivecompensation, management boost their pay by increasing the number of mergers andacquisitions7.The greater of management power, the higher of the executive pay,themanagement boost their pay by increasing the scale of mergers and acquisitions. Inmonopoly industry listed companies management power is larger, the ability and motivation of the executive to lobby the administrative management and the board ofdirectors increase the number of M&A, mergers and acquisitions, M&A scales.TheArticle reflects the executives improve the executive compensation process ofascension through M&A and management power.Since2003, when the state-owned assets supervision and administrationpromulgated the interim regulations, head of the central enterprise operatingperformance evaluation, through the state-owned assets supervision andadministration commission revised the regulations several times, the policy graduallybecame effective, however, compensation still have less explanation on thecompensation performance. According to the analysis of the above conclusion, wefound that executives will use their power to lobby the board of directors andadministrative organs,Therefore, the paper suggested: a comprehensive understandingof executive pay, formulating scientific compensation system; Strengthening internalmanagement, and balancing the management power from internal checks;Reducingthe space of using the management power of customised compensation;Strengtheningthe supervision of executives in acquisition, reducing the opportunity in M&AStrengthening executive compensation disclosure and external market of construction,etc.