Political Connection, Ownership Nature And Executive Compensation

Executive compensation has been a core issue in the field of corporate governance. In this paper, we set Chinese listed companies in A-Shares from 2000 to 2013 as a sample to explore the relation between political connection and the pay-performance sensitivity of executive compensation under the circumstance of different ownership nature. First, the study suggests that political connection has a significantly positive relation between the political connection and the pay-performance sensitivity of executive compensation as well as executive compensation level through all samples. Besides, the significantly positive relation between political connection and pay-performance sensitivity of executive compensation still exists in the sample of state-owned enterprises. In contrast, the relation between political connection and pay-performance sensitivity of executive compensation is not significant in the sample of non-state-owned enterprises. That is against our expectation. These results indicate that, as a kind of invisible resource, political connection acts a different role in non-state-owned enterprises and state-owned enterprises. The conclusion to some extent explains the phenomenon of companies actively seeking relation with government and the executives with political background getting extra compensation. This paper enriches literature of the study about pay-performance sensitivity of executive compensation as well as provides reference to issues of government and enterprise in revolution.