The Seniority Culture In The Board Of Directors And The Effectiveness Of Executive Compensation Contracts

Different from the rules of the general meeting of shareholders to determine the size of voting rights according to the proportion of equity,the resolution rules of the board of directors are the principle of one person,one vote,and advocate the system culture of equality among directors.However,the reality is that there are many boards of directors with seniority,which seriously affects the efficiency of the board of directors and the quality of the resolution.In China,the culture of seniority is an important part of Confucian culture.The phenomenon of seniority in the board of directors of the company is more common and serious.Therefore,this paper will examine the influence of seniority culture on the supervisory role of the board of directors in the context of China's specific system.In particular,since the executive compensation contract is an important system that the board of directors is responsible for,and the executive compensation issue is also the focus of attention from all walks of life,this paper chooses to empirically test the effectiveness of the board of directors from the perspective of the effectiveness of executive compensation contract.Specifically,this paper manually collects and sorts the list of the rankings of the board members in the annual reports of all listed companies in Chinese A-shares,and draws the cultural characteristics of the board of directors based on this,and then uses the annual observation sample data of 18,414 companies from 2007 to 2017 for empirical analysis.The results of this paper find that,relatively speaking,the board's seniority culture significantly reduces the executive compensation-performance sensitivity of listed companies;at the same time,this paper finds the negative relationship between the board's seniority culture and executive compensation-performance sensitivity.Companies with lower private equity ratios in private listed companies and institutional investors have performed stronger.The above conclusions are still significant after the endogeneity test,the main variable measurement method and other robustness tests.In addition,the paper further studies and found that the culture of seniority in the board of directors has also aggravated the problem of over-paid compensation and sticky pay of company executives.Based on the above conclusions,the research in this paper shows that the board's seniority culture will reduce the effectiveness of the company's executive compensation contract,which will damage the effectiveness of the board's supervision.