The Executive Team's Age Gap And Compensation Gap:Theory,Evidence And Economic Consequences

As one of the effective forms of compensation contract incentive,the effective design of compensation gap of executive team is the important part of corporate governance.Since the 1980 s,the research on the compensation gap of executive team has mainly focused on the economic consequences of the compensation gap.The mature theories include Championship theory and behavior theory.These opposite theories are supported by empirical tests.The reason is that there is no mechanism to identify the front-end of the compensation gap.If we can identify the formation mechanism of the compensation gap,the relevant theories of the economic consequences of the compensation gap will have stronger situational applicability and practical significance.Based on the traditional social and cultural background of China,this paper identifies the traditional cultural factors of the formation of the compensation gap of the executive team from the perspective of the objective physiological characteristics of the executive age,and then explores the economic consequences of the compensation gap under the traditional cultural background,so as to provide the more social and cultural background and situational explanation for the championship theory and behavior theory.This paper chooses all A-share companies listed on Shenzhen Stock Exchange or Shanghai Stock Exchange between 2007 and 2016 as the research object.Firstly,this paper examines the influence of the age gap of executive team on the compensation gap,and proves whether the existence of this part of the compensation gap is caused by non-efficiency factors.Secondly,the paper examines the influence of the compensation gap caused by the age gap of executive team on the productivity of enterprises.Further research explores the relationship between the age gap and the compensation gap under different property rights,and also explores the influence of the compensation gap caused by the age gap of executive team on the sensitivity of compensation performance.Through empirical teat and analysis,the main conclusions are :(1)Under the background of Chinese traditional society,there is a significant positive correlation between the age gap and the compensation gap of the executive team,and there are inefficient factors in the compensation gap caused by the age gap of the executive team.Such compensation gap exists in the phenomenon of seniority in Chinese traditional culture.(2)The compensation gap caused by the age gap of executive team exists in the phenomenon of seniority in Chinese traditional culture.Such compensation distribution mechanism distorts the incentive mechanism of enterprises,and ultimately reduces the production efficiency of enterprises.(3)Compared with non-state-owned enterprises,the age gap of executive managers in state-owned enterprises has a more significant impact on the compensation gap,which indicates that the compensation structure of seniority-based in state-owned enterprises is more serious.(4)The compensation gap caused by the age gapof executive team reduces the sensitivity of compensation performance and the validity of compensation contract,which finds an intrinsic mechanism for the reduction of enterprise productivity at a certain level.The innovation of this paper lies in:(1)From the perspective of individual characteristics of executive managers,this paper studies the formation mechanism of the compensation gap,and finds that the age gap of executive managers is an important factor leading to the compensation gap of their team.At the same time,based on the traditional social background of China,it finds that the compensation gap caused by this age gap has the cultural influence of seniority.It provides a new perspective for identifying the formation mechanism of the compensation gap,and enriches the research field of the economic consequences of the compensation gap for executives.(2)In view of the previous studies on the economic consequences of all compensation disparities,this paper,on the basis of screening the formation mechanism of compensation disparities,separates the compensation disparities caused by age disparities and studies the economic consequences of compensation disparities caused by the culture of seniority-based seniority behind age disparities in a more "clean" way,confirming the existence of non-seniority-based compensation distribution system.Efficiency,and ultimately reduce the production efficiency of enterprises.This study provides a more sociocultural and situational explanation for the championship theory and behavioral theory of the economic consequences of the compensation gap.(3)The research explores the internal mechanism behind the salary distribution system of seniority which reduces the production efficiency of enterprises.The salary distribution of seniority distorts the incentive mechanism of enterprises,violates the optimal contract theory and reduces the effectiveness of salary contract.The study provides empirical evidence and theoretical support for the optimal design of executive compensation contract and the regulation of executive compensation in Chinese enterprises.