The Effects Of Compensation Committee’s Characteristics On Executive Compensation Stickiness

All the time, executive compensation has been a hot issue of the public concern. In these years, with the development of the reform of market economic system in our country, the market mechanism of executive compensation has gradually been established, establishing the relationship between executive pay and firm performance, and the listing corporation’s in China executive pay has been showing a significant sensitivity with firm performance. But in China’s listed companies, especially state-owned listed companies, executive compensation chaos has been existing for years. Especially since the financial crisis in 2008, firm performance of Listed Companies in our country has experienced a significant descent, but this did not cause listed company executives compensation decreased, on the contrary, many company’s executive compensation increased. The phenomenon that executive compensation and company performance does not match raises the public’s doubt to the listed companies’pay executives system effectiveness, and the academic call this non matching phenomenon called "executive compensation stickiness", that is, the executive pay increased greater with the rise of corporate performance than reduction with the decline in business performance. Executive compensation stickiness is essentially a kind of agent problem related to executive compensation. It is the expropriation of corporate executives to the interests of shareholders, which reflects the defect of corporate governance mechanism in China listed companies. From 2002, China began to borrow the practical experience of the western developed countries, and explore to establish the system of the Remuneration Committee. It hopes to play the effectiveness of the remuneration committee system, improve the mechanism of executive compensation, and solve the agent problem related to executive compensation. Currently, the empirical study of the effect of Remuneration Committee on executive compensation stickiness in academic is relatively small. Therefore, this paper chooses the characteristics of the Remuneration Committee as a starting point to study their impact on the executive compensation stickiness.This paper selects the state-owned listing Corporation of A-share as a sample of 2010-2013 in china. First, it studies the sensitivity of management compensation - performance and executive compensation stickiness. Then, it chooses the scale of Remuneration Committee, whether contains the company executives, independent director’s proportion and average salary these four characteristics of Remuneration Committee, to study empirically the impact of Remuneration Committee on executive compensation stickiness. The empirical results show that in the state-owned listed companies in our country, the more members in Remuneration Committee, the lower in the extent of executive compensation stickiness; whether Remuneration Committee contains the company executives or not has no significant impact on executive compensation stickiness; the higher the independent director’s proportion is, the lower the extent of executive compensation stickiness is; the higher the average salary of Remuneration Committee members is, the lower the extent of executive compensation stickiness is. The empirical research of this paper not only enriches the research literature on the compensation committee and executive compensation, but also provides some experience for improving the remuneration committee system of listed companies in our country.