Company Governance, Executive Pay And Optimal Contract

Executive pay of listed companies has always been the center of the social public attention, the more stubbornly high executive pay increase the public’s doubts, they doubts excessive salaries and their roles in the enterprise, contribution to the company are equal. Whether corporate governance can effectively restrict executive compensation, executive compensation is determined by what,Whether optimal compensation contract is effective. In such a background, the executive pay system urgently need scientific and reasonable analysis and evaluation.This paper first discusses two theories associated with executive pay, namely corporate governance theory and optimal compensation contract theory. This paper study the correlation between corporate governance and executive pay to check corporate governance validation; study the correlation between executive pay, corporate performance and executive dismissal to test the effectiveness of optimal compensation contracts in order to strengthen corporate governance and optimize the pay system. Based on sorting out previous studies and theoretical analysis, this paper proposes research hypotheses. Under the other conditions in certain cases, this paper chose corporate governance,executive pay, corporate performance and executive dismissed related panel data during2007-2012of the A share listed companies from Shanghai and Shenzhen stock markets of China as research sample to analyzes the relationship.After a regression analysis of the data the following conclusions reaching the following conclusions:(1) there is a positive correlation between executive pay,corporate performance, chairman and general manager two jobs in one, the board size, and executives shareholding; there is a negative relationship between ownership concentration, independent directors ratio, the proportion of state-owned shares, ownership concentration and executive pay;indicating that executives behavior and executive pay can be effectively constrained by corporate governance;(2)Under the certain circumstances,there is a positive correlation between executive pay and company performance,indicating that executive pay extent linked to the company’s interests;(3)When executive pay is higher, the company cannot be dismissed, but when faced with poor performance of the company, will increase the risk of dismissal, means that Chinese listed companies’ executive compensation contracts with some degree of effectiveness.