The Ultimate Control Of The Separation Of Powers, Board Independence And Executive Pay Sticky

Executives of listed companies has been a subject of concern in special social status, and they also are the important elements of human capital in enterprise, then how to motivate executives and consistent the interest objectives of executives with shareholder’, this is a fervent concern topic in management incentive area. At present, compensation based performance is the main compensation contract pattern to encourage executives and alleviate the conflict of principal-agent in modern enterprise. However, the phenomenon such as ‘astronomical compensation’ and ‘the poor temple the rich abbot’, which triggered investors question about compensation based performance contract. When the performance declined, executive compensation did not go down or even go up, which is called compensation stickiness. There are so many papers focus on that how management power influences compensation stickiness, but these papers are based corporation level, and papers study from ultimate controllers are less. The control of management is different from two rights of ultimate controllers whether to separate, then affect the power of management, and further affect compensation stickiness. At the same time, whether the separation of the two rights is the most important factor that influences the power of management. Therefore, from the perspective of the ultimate controllers study the separation of two rights how to influence executive compensation stickiness is worth discussing.In this paper, A stock listed corporations in Shanghai and Shenzhen are subjects in this study, the empirical data from 2012 to 2014 will be study sample. This paper bases on Principal agent theory, Compensation contract theory and Management power theory such as theoretical basis and systematically summarizes the relevant research literature on executive compensation stickiness, bases on a combination of literature analysis and empirical analysis to study, standing on the point of view that separation of ownership and control about ultimate controllers, this paper studies how management power influences compensation stickiness. The results of empirical analysis shows: firstly, executives compensation has remarkable positive correlation with enterprise performance in listed companies in China; secondly, executives compensation has stickiness characteristics, when performance raised or declined, compensation shows dissymmetrical performance sensitivity; thirdly, when the two rights of ultimate controllers separated, adding management power can increase executive compensation stickiness; fourthly, in the state of the two rights separated, the introduction of Directorate Independence did not weaken the executive compensation stickiness. According to the results, this paper puts policy proposals such as strengthen the supervision of ultimate controllers, perfect the independent director institution, improve executive compensation incentive system, establish and improve professional manager market. And this paper puts forward the lack of this study and research direction which deserves discussion in the future.