The Study On The Influence On CEO Pay-performance Sensitivity From Board Of Directors With Family Involvement

Family business is a common form of business organization in the world.As the backbone of the development of China's national economy,family businesses are rushing forward in China's capital market with an irresistible trend.The increasing number of family businesses shows their tenacious vitality.With the development and growth of family business,the problems existing in its internal corporate governance structure gradually become prominent,and the agency problem of family business becomes more and more complex.Family members' different goals and power allocation lead to serious agency conflicts within the family.Meanwhile,factors such as the removal of family management rights due to the introduction of professional managers and the gradual dilution of family equity in the development process affect the long-term development of family businesses.Therefore,how to improve the efficiency of corporate governance and strengthen the supervision and restraint of the management while maintaining the family's control over the enterprise is an urgent problem for family enterprises to solve.As the core of corporate governance,the board of directors exercises the functions of corporate management and decision-making.The important responsibility of the board of directors is to implement effective supervision and incentives for the management,improve enterprise value and realize the expected earnings of shareholders.In the development process of family business,in order to maintain the control of the business,family members will be arranged to participate in the board of directors.Thus the board of directors is familial,and its governance efficiency is affected by the family.Relevant studies indicate that family members' involvement in the board of directors can improve the efficiency of corporate governance and reduce agency conflicts.However,some scholars have found that excessive family board seats lead to a decrease in the independence of the board of directors,a weakening of the supervisory role of family executives.The controlling family has the motivation and ability to empty the listed company,and the board of directors becomes the channel for the family to transfer its interests.In addition,family members may play different roles in the board of directors,such as the executive director of the family or the non-executive director of the family,and these two types of director roles may also play different roles in board governance.In terms of the formulation of compensation contract,the governance effect generated by the family's involvement in the board of directors will be reflected in the effectiveness of the executive compensation mechanism.So how will the proportion of family members on the board affect the effectiveness of the executive compensation system? What role do different family directors play in the governance of the effectiveness of executive compensation contracts?In view of the above problems,this paper took Chinese family listed companies from 2015 to 2017 as the research object,empirically analyzed the influence of family involvement in the board of directors on CEO pay-performance sensitivity,and tested the effect of family involvement in the board of directors on the governance efficiency of the board of directors.The findings are as follows :(1)compared with professional managers,family members as CEO will significantly reduce the correlation between CEO compensation and performance;(2)the higher the proportion of family directors,the lower the salary performance sensitivity of family CEO,but the higher the salary performance sensitivity of professional managers;(3)Family executive directors significantly reduce CEO pay-performance sensitivity,while family non-executive directors significantly improve CEO pay-performance sensitivity.It shows that family members serving as directors have a more positive supervision effect on professional managers,and the allocation of more family non-executive directors can effectively reduce the power conflict within the family,which is conducive to improving the efficiency of board governance.In the end,this paper puts forward some suggestions to improve the governance structure of the family board of directors and optimize the executive compensation contract,hoping to provide new inspirations for the design and implementation of relevant policy arrangements of family corporate governance.