The Interactive Effect Of Diversified Management And Executive Compensation

At present,market economy is unpredictable,so diversified operations have become a common means for companies to adapt to market changes and diversify market risks.Although the implementation of a diversified business strategy can expand the scale of the company and improve the company's performance or company value,not all companies can succeed because of the diversification strategy.Diversification is one of the company's macro-level strategies.The company's directors and senior executives will adopt different levels of diversification based on different motives.Jiang(2006)shows that the choice of diversified business models of listed companies in China is Out of organizational rationality(improving value)and personal rational motivation(getting high pay).Since 2005,listed companies in China have been forced to disclose the remuneration of each incumbent executive.The openness and reputation mechanism of the manager's market strengthens the influence of the executive compensation mechanism on executive decision-making behavior,and the company's diversified business strategy choices will also be affected.Therefore,this paper takes executive compensation as an entry point to study the relationship between compensation and diversification that affects the behavior of executives.The workload and ability of executives will affect their remuneration.The changes in work intensity,difficulty and business performance brought about by diversified operations may have a certain impact on executive compensation.Most of the existing researches only study the relationship between diversification and executive compensation.For companies that have diversified operations,it is important to effectively attract and retain talented executives and leverage their potential to increase the value of diversification.Therefore,from the perspective of endogeneity,this paper explores whether there is an interactive effect between diversification and executive compensation.In addition,as an external person in the board of directors,can an independent director fully play its role of supervision and decision-making advice? Based on examining the interactive effects of diversification and executive compensation,this paper will further adjust whether the independent directors can play their role in the interaction between diversified operations and executive compensation.This paper takes the 2007-2016 CSI A-share non-state-owned listed company as a sample to construct a simultaneous equations model for empirical testing,exploring diversified operations(diversifications and diversified performance)and executive compensation(executive compensation levels).And the relationship between executive compensation structure)and further examine the impact of independent director governance on this relationship.The results of this paper show that:(1)there is an interaction between diversification(diversification and diversified performance)and executive compensation(executive compensation level and executive compensation structure),diversified management for executive compensation The impact is positive,and the impact of executive compensation on diversification is positive;(2)Independent director governance only weakens the positive impact of diversification on executive compensation,and does not effectively regulate executive compensation for diversification.The positive influence of the operation,the independent directors fully played the supervisory function,however,the effectiveness of their decision-making recommendations was insufficient.