An Empirical Study Of The Relationship Between Executives Compensation And Corporate Performance From The Perspective Of The Enterprise Life Cycle

As China’s market economy continues to improve and develop, the ownershipand management of the modern enterprise are separation. Due to informationasymmetry and the inconformity of the interests and objectives and other causes, themanagers’ moral hazard and adverse selection problems appear, resulting in agencycosts. Enterprises need to establish a reasonable and effective pay incentives tobalance the principal-agent relationship between them, which is of great significancefor enterprises to maximize the value of the owners and managers’ seeking of"win-win" situation. In recent years, after “million annual salary” of Ma Mingzhe,chairman of Ping An Group got exposure and many business executives astronomicalsalary arouse growing interest after the economic crisis, executive salary limit policieshave been introduced, and some companies have adjusted the executive salary.Executive compensation depends on corporate performance, the impact of corporateperformance on the development of executive compensation is of practicalsignificance in the current society. The enterprise has its process from appearance,development to recession, and every life stage has different characteristics, soexecutive compensation and corporate performance may show different correlations,and it is more scientific and of reference value to study by placing the relationship ofthem in different life cycles.In this paper, literature research, theoretical analysis and empirical researchmethod of combining are adopted, on the basis of the relevant literature reference andstudying abroad related theory and on the basis of the relevant data of China’s A-sharelisted electronics companies disclosed between2011-2013, from the perspective ofcorporate life cycle, the relationship between executive compensation and corporateperformance at different stages of the life cycle are studied by using empiricalresearch methods.Thus，we can find when the enterprise is in the introduction period,executive compensation and corporate performance has unconspicuous link; when it’sin the rise period, an obvious positive correlation occurs between executive compensation and corporate performance; while in mature period although positivecorrelation between executive compensation and corporate performance still existsbut not obvious; then, when the company development passes the mature period intodecline phase, negative correlation between executive compensation and corporateperformance maintains their relationship. In addition, as shown from the empiricalprocess, whatever life cycle period is the corporate in, there is positive correlationbetween executive compensation and company size while negative correlationbetween executive compensation and the proportion of independent directors in theboard. Thus we can perfect the system of executive compensation of listed companiesthrough the following methods. Enterprises should focus on their own life cycle, andbuild a reasonable and scientific salary system; enlarge the proportion of independentdirectors, and strengthen the supervision over executive compensation incentives;perfect the compensation committee, and promote normalization and rationalizationof executive compensation; perfect the information disclosure, and strengthen theintegrity and clarity of the executive compensation disclosure.This paper has its innovation in the research perspective. Looking back literaturebefore, we can find that most studies on executive compensation and corporateperformance were based on the whole listed company as the research sample ordistinguished samples industry by industry, but very few ones took the enterprise lifecycle into consideration. So a particular industry is chosen to satisfy the needs ofstudying and this paper studies the relationship between executive compensation andcorporate performance in different stages, which is dynamic and has practical value.