Compensation Dispersion, Managerial Power And Company’s Growth

With the deepening of China’s economic reform and the improvement of information disclosure system of listed corporation, the issue of remuneration distribution gradually comes to the public. Recently, executive remuneration of listed companies is increasing rapidly, which triggers a considerable social controversy. At the same time, compensation dispersion between top management group and other staff is also expanding. Therefore, compensation dispersion becomes the focus of practical and theoretical investigation.Besides, as a newly emerging theory, managerial power theory explains the phenomena that optimal contract can not tell, which stimulates great interest in academic circle. Managerial power theory becomes a new focus in the field of management intensive study. Based on particular institutional background of China, the relationship between compensation dispersion and company’s growth and the impact of managerial power on such relationship are worth studying. Therefore, this paper studies the relationship between compensation dispersion and company’s growth. Then, we tend to test the impact of managerial power on compensation dispersion from the perspective of managerial power theory. Finally, we further explore the impact of managerial power on the relationship between compensation dispersion and company’s growth.Based on all the A-share listed companies, exploring the relationship between compensation dispersion, managerial power and company’s growth, we can come to the following conclusions : First of all, compensation dispersion is significantly and positively related to company’s growth, which means that tournament theory is applicable for China’s listed companies. In other words, compensation dispersion can arouse employees’ enthusiasm for work, which will improve company’s sustainable development. Second, managerial power is significantly and positively related to compensation dispersion. Third, managerial power does affect the relationship between compensation dispersion and company’s growth. It will significantly weaken the positive influence of compensation dispersion on company’s growth.According to the conclusion, related suggestions are proposed: First of all, according to the tournament theory, compensation dispersion is helpful to firm performance, thus compensation dispersion between top management group and other staff can be appropriately widen, in order to arouse employees’ enthusiasm for work. Second, according to managerial power theory, managerial power will restrain the incentive effect of compensation dispersion, so we should ensure the independence of board and remuneration committee and strengthen supervisory control on managerial power. Third, we suggest to improving external markets, such as manager market and product market competition, to restrict managerial self-interested behavior. Last but not least, according to managerial power theory, executives tend to obscure the arrangement of remuneration to conceal extra earnings, thus distribution of remuneration should be open to prevent the breed of managerial self-interested behavior.