The Research On Effectiveness Of The Executive Compensation Incentive Based On Enterprise Performance Perspective

Executives as a special group of compensation management, their behavior will be indispensable to the influence of enterprise performance. As an important means of incentive theory, salary incentive is vital for the employee behavior, therefore, executive compensation incentive is a key point on affecting the enterprise performance directly or indirectly. The effectiveness of executive compensation incentive, is not just a matter of current corporate rewards of labor costs, but also a matter about enterprise economic benefits in the future, and even affecting the survival and development of enterprises.In recent years, the executive has been the focus of attention, one of the most is the invalid incentive about the executive compensation. Especially when part of the executive compensation continues to grow under the condition of market downturn and enterprise operating income decreasing. In fact, the focus of the query is whether the executive should get increasing pay or not, and why. That is to say, whether it is taken for granted of the increasing executive pay, and whether it is well-founded. Change a point of view, whether the growth of executive pay rewards appropriate business performance, that also will be the problem of the effectiveness on executive compensation incentive.With the above questions, this article starting to explore, there is no direct way to evaluate the effectiveness, but some indirect way. This article selects form the angle of enterprise performance evaluation. So the article does a wide range of literature research, and accumulates theoretical basis on the compensation theory, incentive theory, the tournament theory and the social comparison theory, and also constructs a game model of three phase combining the predecessors’ research. On the basis of theory analysis and model derivation, this article builds the evaluation criteria evaluation criteria of the executive compensation incentive based on enterprise performance: executive compensation is positively related to corporate performance, executive pay based on market comparison is positively correlated to enterprise performance based on the industry comparison, enterprise senior team pay gap and corporate performance shows inverted u-shaped relationship.Based on the evaluation criteria evaluation criteria of the executive compensation incentive, this paper constructs the regression model on the executive compensation incentive and corporate performance based on enterprise performance, and combined with the related data on 2014 main board manufacturing companies carries on the empirical analysis. The empirical results are as follows: executive compensation in main board manufacturing companies is positively related to corporate performance; their executive pay based on market comparison is positively correlated to enterprise performance based on the industry comparison; enterprise senior team pay gap and corporate performance shows inverted u-shaped relationship, that is, the result meets the three conditions of executive compensation incentive effectiveness. Therefore, the executive pay of 2014 main board manufacturing companies is effective on the whole. However, there is still room for improvement, which is mainly manifested in the following aspects: first, the data in this paper comes from 2014 main board manufacturing companies, and eliminated the outliers of empirical analysis, if not eliminate outliers, the empirical results are not ideal; Second, although the paper finally got ideal regression results with the three models, when analyzing manufacturing executive compensation and corporate performance into the market comparison, the correlation is reduced, and when executive pay gap has widened, executive pay gap and corporate performance just got small negatively correlation, Therefore, the result of empirical study shows that manufacturing company executive compensation incentive is effective on the whole, but also need to continue to improve effectiveness.Based on the theoretical analysis and model inference, this article builded the evaluation criteria of the executive compensation incentive based on enterprise performance, and measured the executive compensation incentive effectiveness of 2014 main board manufacturing companies with the standard. The result answered the doubts about the executive compensation incentive effectiveness basically. The results of the study enrich the theory of executive compensation and executive incentive theory in theory, and may provide certain reference and help to the enterprise executive compensation incentive policy making in practice.