The Effect Of External Pay Gap Between Executives On The Corporate Performance

China’s economy steps into the “new normal” phase, which breeding a great development opportunity. As the same time, the economy is facing structural optimization and upgrading of pressure and shifted gear from the previous high speed to a medium-to high speed growth. The improving of allocative and productive efficiency can promote the economic growth effectively. It is necessary for investment in human capital especially senior resources if you want to improve business allocative efficiency and the configuration of social production efficiency. It is inevitable that human capital executive investment was related to the problems of executive incentive compensation. As we all know, the core of principal-agent theory is the executive incentive compensation. So the corporate performance was related to the effectiveness of executive incentive compensation. Furthermore, the fairness of the external gap social distribution was involved with the stability of external pay gap.Different industries lead to the distinction of external pay gap. The paper has collected different company in the same industry so as to eliminate the impact of industry on the external pay gap. Due to pharmaceutical and biotech industry executives of listed companies with a speeding salary increase, a strong executive talent mobility and weak performance compared to the other developed countries. The external pay gap of executives is an important factor that affects the social justice problems. Based on the multiple regression analysis of Chinese pharmaceutical and biotech industry listed companies in 2005—2014, we have explored the influence of the external executive pay gap and corporate performance.Besides, we have also studied the mechanism between the executive power and pay gap for state-owned firms. The positive relation between external pay gap of non-state firms and corporate performance whose executive pay levels is higher than that of industrial average, but there is no significant correlation between the executive pay gap of the state-owned firms and corporate performance whether executive pay levels was lower than the industrial average or executive pay levels was higher than the industrial average, nor have we found there exists a direct correlation between external pay gap of non-state-owned firms and corporate performance when executive pay levels was lower than the industrial average.Last and most, we put forward the relevant policies and proposals on the basis of the formulation and disclosure of executive compensation incentive: Firstly, build a blameless executive compensation system and optimize the remuneration structure; Secondly, it is necessary to adjust the excessive payment of the state-owed listed companies executives.; Thirdly, it is reasonable to arrange the executive pay gap between non-state-owned enterprises; Fourthly, we must strengthen the market of professional manager and improve the mechanism of information transfer unswervingly. Furthermore, we pointed out the shortcomings of this study and future prospects.