Study On The Independent Director's Allowance And Executive Compensation Contract-Based On The Perspective Of Conspiracy

The independent director system as an important mechanism to improve corporate governance of listed has introduced to our country more than ten years,it has always been a great concern of academics and practitioners.The original intention of the design of the independent director system is to prevent the company from being controlled by the insiders,and to make the managers try their best to protect the interests of the shareholders..Independent directors supervise and assess the executives by participating in the company's operations and the decision-making,developing appropriate executive compensation contract to motivate executives diligence behavior.Thus,the effectiveness of executive compensation contracts should reflect the effect of independent directors'participation in corporate governance.However,in recent years,astronomical salaries events of executives have been frequently exposed,executive compensation and corporate performance does not match the phenomenon is not uncommon,what is the role of the independent director in the unreasonable compensation phenomenon which deviates from the shareholders'willingness?Do they play their due role?What are the factors that affect its ability to fulfill its duties?Will the independent director conspire with executives?In this paper,the substantive gains obtained by the independent director which is the allowance of the independent director as a starting point,research on the relationship between independent director's allowance and executive compensation as well as the sensitivity of executive compensation to performance from the consensual perspective,and exploring factors that will promote or inhibit the collusion in executive compensation contract between the independent director and executives,to clarify the obstacles encountered in the actual operation of the independent director system and to explore the future direction of the independent director system,wishing to better improve the governance issues of the listed company.In this paper,using the theoretical analysis and empirical analysis,research on the relationship between the independent director's allowance and executive compensation as well as the sensitivity of executive compensation to performance and affecting factors.Using datas of the A-share listed companies in the Shanghai and Shenzhen stock exchange from 2010 to 2014 for testing,we find:(1)Independent director allowance is significantly positively correlated with executive pay and sensitivity negatively correlated with the sensitivity of executive compensation to performance;(2)In listed companies of the state-owned nature,CEO older,chairman comes from of the shareholders' unit,or the independent directors attended the board meeting in person less,the positive correlation between the independent director's allowance and executive compensation and the negative correlation with the sensitivity of executive compensation to performance are more significantly;(3)In listed companies of equity balance is higher,have overseas background independent directors,institutional investors own a larger shareholding ratio,the location of the market development have a higher degree,the positive correlation between the independent director's allowance and executive compensation and the negative correlation with the sensitivity of executive compensation to performance tend to ease.Research indicates:(1)There is a conspiracy relationship between the independent director and executives when the executive compensation is determined;(2)When the major shareholders are absent,the CEO is authoritative,the chairman have a stronger relevance,and the independent director lack of duty exist,the collusion of independent directors and executives have a higher degree;(3)When equity balance is higher,have overseas background independent directors,institutional investors are overseeing,the location of the market development have a higher degree,which is the internal control and supervisory power to the executives is greater or the external market competition is more full,the collusion of independent directors and executives is relatively low.This paper argues that reforms can be made from the following aspects to reduce collusion between independent directors and executives:(1)Setting up the independent directors association,improving the independent director's election mechanism;(2)Building a more complete assessment system of executive compensation;(3)Optimizing equity structure,play shareholders' role of checks and balances;(4)Speeding up the process of marketization,cultivate the manager market,to optimize the independent director system and the institutional environment for the effective operation of executive incentive mechanism.