Research On The Relationship Between Executive Salary Limit And Corporate Performance In State-Owned Enterprises

After the economic crisis in 2008,the public demanded legislation against excessively high executive salaries worldwide.Regulations in Canada,Germany,and the Netherlands all require the board of directors to clearly pay attention to situations that may cause executives to pay huge expenditures.Despite the proposal to limit executive compensation,legally binding standards may be difficult to implement due to concerns about unintended consequences,including reduced risk exposure and rewards for mediocre employees.Therefore,despite the fierce controversy over the supervision of executive compensation,governments in developed markets have avoided more radical compensation cut proposals,relying instead on market mechanisms or shareholders’ compensation voice plans.However,the Chinese government has issued a set of regulations to control the compensation of executives.The compensation of executives of state-owned enterprises needs to be set with reference to the average salary of employees to ensure social fairness as much as possible.For example,on August 29,2014,the Politburo meeting of the Central Committee of the Communist Party of China reviewed and approved the "Central Management Enterprise Remuneration System Reform Program."The stricter "salary limit order" following the "Guiding Opinions of the People’s Republic of China"directly led to the cut in the salaries of the heads of some central enterprises.Based on the "Remuneration System Reform Plan for Responsible Persons of Centrally Managed Enterprises" promulgated in 2014,I constructed a double-differential model to test whether and how the salary limit of state-owned enterprise executives affects corporate performance.The results found that the state-owned enterprise salary limit and corporate accounting performance showed a negative correlation.After further distinguishing between central state-owned enterprises and local state-owned enterprises,it is found that the restraining effect of the "salary limit order" on corporate performance mainly comes from local state-owned enterprises.This may be due to the strong political promotion of central state-owned enterprises,which provides implicit incentives..In addition,I also used propensity score matching method,entropy balance method,placebo test and other different methods to strengthen the effectiveness of causal inference.I also conducted a series of robustness tests,and the results were still consistent.Finally,I found that when the CEO’s salary is lower,the industry monopoly is higher,and the media attention is lower,the results are more pronounced.The innovations and research contributions of this article include the following aspects:First,using the 2014 state-owned enterprise executive salary limit policy as a research background,I analyzed the impact of executive salary limit on corporate accounting performance and enriched the related salary incentives.literature.Second,I further distinguished the impact of the 2014 state-owned enterprise salary limit policy on local state-owned enterprises and central state-owned enterprises.It turns out that the salary restriction policy of local state-owned enterprises has a greater impact,and that the central state-owned enterprises are almost unaffected.Third,the conclusions of this article have certain guiding significance for state-owned enterprises’ salary reforms.In recent years,the government has successively promulgated a series of salary limit policies to maintain social equity.The remuneration policy should take into account social equity and corporate efficiency.