An Empirical Study On Influencing Factors Of Abnormal Executive Compensation In Listed Companies

An effective mechanism of executive incentives plays a vital role in the healthy and steady development of the company. The China’s economy develops rapidly, while the existing corporate governance mechanism is not able to accompany its development and synchronously improve itself, which leads "Sky roar condensation", "compensation upside down" and other abnormal executive pay. Many scholars at home and abroad challenged that the formulation of executive pay is no longer follow the optimal contract theory. With the expansion of executive power, they damage the company’s vale and shareholders’ interest to obtain their private interests. Therefore, how to effectively motivate executives and how to suppress the abnormal phenomenon cause great attention of academics and government departments, and they need to be solved urgently.The special national conditions of our country and the difference of enterprise property rights may also affect the process of setting pay. Especially in the current rapid economic development and the situation that corporate governance mechanism has defects, the government’s macroeconomic regulation and control often has a guiding role in compensation. From 2008, the Chinese government began to strengthen the work of executive compensation laws and regulations and promulgated a series of papers. One of the most influential papers is "compensation limit order" in 2009 issued by the six central ministries in State Council’s consent, it clearly establishes that the highest pre-tax annual salary of executives in state-owned enterprises doesn’t exceed 2.8 million. In August 2014, "reform program of executive compensation in central management enterprises" has been promulgated. The plan aims to standardize the income of state-owned enterprises, strengthen the supervision on executive compensation and make the compensation structure reasonable. Such a strong government intervention whether can reduce the abnormal executive compensation of state-owned enterprises and make non state-owned enterprises compensation formulate rationalization? This question is worth to explore.Based on the above analysis, the main purpose of this paper is to study the current situation and the deep level reasons of abnormal executive compensation in China’s listed companies, and the influencing factors of abnormal executive compensation. After reviewing the relevant literature, the content choose 2010-2014 five-year sample of Hu Shen stock listed companies in China and analyze the influencing factors of abnormal executive compensation from management powers, ownership structure, nature of company and area characteristics.The results show that there is a positive correlation between abnormal executive compensation and board size, the proportion of independent directors, CEO duality, executive’s tenure and age, the company that belongs to developed regions and is a non-state-owned enterprise; there is a negative correlation between abnormal executive compensation and highly concentrated ownership, executives own shares.Based on the above analysis, the article divides the whole samples into state-owned and non-state-owned groups according to the nature of property rights.It finds that under the background of different property rights, different factors make different influence to the abnormal executive compensation.