The Relationship Between Management Power And Executive Compensation Viscosity Of State-owned Listed Enterprises

The development of the modern enterprise system, which caused widespread separation of ownership and control right, generates agency relationship problems. According to the optimal contract theory, the best way to solve the principal-agent problem and reduce agency costs is designing and implementation of scientific and reasonable salary contract, making the link of performance and remuneration closely, thus motivating managers to work harder for maximize enterprise value creation. However, due to asymmetric information, bounded rationality, weakness of managing regulatory mechanisms and other reasons, out of rent-seeking motives, the managers often use their power to influence the design and development of the remuneration of contract, seeking for their high salaries, resulting agency costs increase. In recent years, "astronomical salaries", "zero pay" and other remuneration grimace appeared frequently, especially in state-owned enterprises. Executive pay exorbitant salaries, the large pay gap, out of touch of pay and performance show the weakness of salary setting mechanism, which caused widespread concern of society. Many scholars also studied current situation of executive compensation and found that there is a nonlinear relationship between pay and performance, which called pay viscous.To change this phenomenon, the government introduced series of regulatory remuneration policies gradually since 2003. Among them, the "Guiding Opinions on Further Regulation of the central enterprises’manager pay", enacted in 2009, may be referred to Chinese Version salary limit order, setting the mode and range of central enterprises managers pay. During the two sessions in 2013, the State Council approved and transmitted the "Opinions on deepening the reform of the income distribution system," clearly pointed out that state-owned enterprises should focus on executive pay as income distribution reform. So, what is the economic significance of the remuneration policy control, what is the impact on executive compensation and management behavior? Sort out these problems is of important practical significance for the strengthening of state executive compensation incentive.Based on the above analysis, the paper focuses on the relationship between pay and executive powers under the control of management. We focuses on the following questions:Is executive remuneration viscous really exists in state-enterprise? What is the affect of excess power management on executive pay and remuneration viscosity? Whether government regulation has reduced the excess executive pay, pay sticky inhibition phenomenon, and influence the executive pay through management power? To answer these questions, this paper reviewed the relevant literature and theory, selected state-owned companies listed in Shanghai and Shenzhen A-share during 2005--2014 as the sample for empirical testing. The results show that:executive compensation pay sticky phenomenon is existing in state-owned, and the degree of central enterprise if stronger than the local state-owned; the degree of power management has a positive impact over executive pay and salary viscosity; executives salary limit order will inhibit excess salary and remuneration tack level, but it also reduces the pay performance sensitivity; in addition, there is no evidence show that the salary limit order can have an impact on executive pay through management power. For research results, this paper proposes policy suggestions from various aspects to improve our executive compensation incentive mechanism under special economic and political environment.