The Influent Of The Geography Of Independent Directors Over The Effectiveness Of The Executive Pay Contract

The research of incentive effects of the executive compensation is still the hot issue in the area of corporate governance.It's one of the basic responsibilities for independent directors to make a scientifically reasonable executive compensation contracts.However,whether the independent directors have an effect on the establishment and assessment of the executive compensation contracts has not reach an agreement.With the introducing of geographic economics into Finance,more and more scholars pay attention to the influences of geographic position on financial decision-making.And they also focus on the economic consequences of independent directors.Thus,whether the geography of independent directors will affect its supervision?This article analyses it from the perspective of the effectiveness of the executive pay contracts.This paper uses the listed company from 2010 to 2014 as an objectof study.Manually collecting the residence information about independent directors,and then compare it with the information about the location of listed companies.If the residence of the independent directors and the location of listed companies are in the same province,we define it as local independent directors,or nonlocal independent directors.Firstly,We analyze the influence of the nonlocal independent directors on the effectiveness of the executive pay contracts from the perspective of the geography of independent directors.And then analyze which factors will influence the supervision of nonlocal independent directors on the compensation contracts,mainly include:Whether nonlocal independent directors perform their duties actively or not,the intervention of CEO's power,the availability of information and the different demand of the different property nature of the enterprise on the ability of supervision of nonlocal independent directors.The empirical findings show that(1)nonlocal independent directors can significantly improve the effectiveness of executive compensation contracts.(2)if nonlocal independent directors work in the remuneration committee,they will have a positive role on the relationship between nonlocal independent directors and the effectiveness of executive compensation contracts.(3)the intervention of CEO's power has a negative role on the relationship between nonlocal independent directors and the effectiveness of executive compensation contracts.(4)the frequency of board meeting also has a positive role on the relationship between nonlocal independent directors and the effectiveness of executive compensation contracts.(5)nonlocal independent directors can significantly improve the effectiveness of executive compensation contracts,but this effect is only found in the state-owned enterprises.The thesis studies the economic consequences of the geography of independent directors from the view of the establishment of the executive compensation contracts,and makes a supplement to the research of the geography and economic decisions especially the geography and financial decisions.Meanwhile it can improve the understandings that the geographic features of independent directors can influence the function.It makes for the listed companies to objectively hire independent directors as required which can reduce the extra costs.Thus we can guarantee the effectiveness of the independent directors and truly make the independent directors play a due part in the corporate governance.