The Study On Executive Pay Viscosity In The Perspective Of Managerial Power And Remuneration Regulation Policies

The outbreak of the financial crisis has brought the huge challenge on China’s economy.And it leads a sharp decline in living standards and quality.But the executives of the state was listed companies get caught up in "astronomical salaries",which caused the widely questions of the public.The optimal contract theory is based on a confliction of executives and shareholders to be coordinated as a starting point.However, when the board of directors in designing compensation contracts,they tend to deviate from the goal and make the phenomenon of executive pay viscosity.From the internal governance of the state-owned listed companies, the imperfect governance mechanisms lead to expansion of the managerial power so that executives can affect even own the pay.From the external governance of the state-owned enterprises,facing of public outcry,the government had to strengthen the regulation and issued a series of policy to restrict the level of executive compensation to prevent the phenomenon of the "astronomical salaries" appears again.Therefore,this paper respectively from the intermal and external environment of the enterprises study on the the phenomenon of executive pay viscosity has certain theoretical significance and practical significance.In this paper, we use the state-owned listed companies’ datas from 2009 to 2014 as the study sample and adopt the combination of the theoretical analysis and empirical research methods to study the phenomenon of executive compensation sticky.Firstly,This paper combs the relevant literature reviews of executive pay viscosity.Next this paper expounds the basic theory of executive pay viscosity.Then it uses multiple regression analysis to verify the existence of executive pay viscous, and takes advantage of the interaction terms to test the effect of the managerial power and compensation regulation influence on the pay viscosity.At last, the research summaries the conclusion and puts forward to the policy recommendations.In this paper, we can summary three conclusions:(1)In the state-owned listed companies,the executive compensation and the enterprises’ performance are positively correlated,there is the phenomenon of executive compensation sticky.(2)Executives use their power not only to affect their own pay levels,but also to cause the sensitivity asymmetry between executive pay and the corporates’ performance.When the rise in the corporates’ performance,powerful executives enhance the sensitivity between executive pay and the corporates’ performance.While the performance declines,it will reduce the sensitivity and reduce the space of decreasing their own pay.Under the influence of the managerial power, the executive compensation has the elasticity of the up and the viscosity of the down.(3)In the state-owned enterprises,the compensation regulation significantly reduces the level of the executive pay and reduces the sensitivity between the executive compensation and the companies’ performance,resulting the executive pay has a viscosity characteristic.Based on the special institutional background of the state-owned enterprises in China,this paper makes a reasonable interpretation for the phenomenon of executive pay viscosity respectively from two aspects which are the internal managerial powerand the external compensation regulation.It adds a new evidence of optimizing the allocation of powers within the enterprise.This will also help improve the external governance mechanism of the enterprises and provides a new perspective to evaluate the effectiveness of the compensation regulation.It provides a meaningful reference for the current problems and the future reform of compensation regulation.