| Under the system of separation of ownership and operation of modern enterprises,the owner of the enterprise will entrust the management power to the manager through contracts and restrain his behavior.At this time,the goals of executives(agents)and shareholders(principals)are not exactly the same,so the principal-agent problem will arise,and modern enterprises usually adopt remuneration incentives to solve the conflict of interests between the two.With the development of China’s economy,the rapid growth of executive compensation in China’s listed companies has aroused heated debates.The phenomenon of high salaries indicates that there are problems with the existing executive compensation contracts,highlighting the importance of research on the issue of executive compensation contracts.In reality,in order to solve this problem,the government and related institutions often regulate the remuneration of listed companies’ executives in various ways.In countries such as the United Kingdom and the United States,taxation has always been a common means of intervention.For China,in addition to formulating a series of policies such as the "salary limit order",strengthening and improving the regulation of taxation on executives of state-owned enterprises and other high-income earners is also an important way to improve the design of executive remuneration.On the other hand,in the face of some uncertain phenomenon that occur in real life,it is difficult to obtain an accurate sample distribution due to the lack of information historical data to describe its probability,we choose to study the problem of optimal pay contracts for executives in two different situations: the traditional market and the uncertainty theoretical framework.Firstly,this paper introduces the current situation of executive compensation and the necessity of taxation to regulate executive compensation,and then analyses the current status of research on principal-agent theory,executive compensation contracts and uncertainty theory.On this basis,the research significance of establishing an optimal compensation contract model for executives under tax regulation is derived.Secondly,this paper develops an optimal remuneration incentive model for the principal-agent relationship between firms and executives in a traditional market environment,using the golden parachute as an example.The firm aims to achieve value-added outcomes and assumes that executives contribute to the acquisition of the firm in order to receive severance payments.A generic model is developed using a two-stage principal-agent framework,with the first stage: the firm determines the executives’ severance payments and compensation,and the second stage:the executives choose the level of effort,assuming that the firm can be successfully sold and that the executives choose the level of effort to maximize utility given the compensation and severance payments.Changes in executive compensation contracts under the three different scenarios are examined separately.It is found that a additional tax on executive severance payments results in the company changing severance to a non-taxable bracket and the executive can shift the tax burden through stock option exercises,changing taxable income.This makes the taxation of executive compensation counterproductive.Finally,numerical simulations are conducted using Matlab software to propose relevant suggestions for tax regulation of executive compensation.Then,this paper introduces a tax on executives’ variable remuneration based on the classical principal-agent model under the framework of uncertainty theory to establish an optimal remuneration contract model for firms and executives.The study indicates that the bonus tax has different effects on fixed salaries and bonus rates.A higher bonus tax will reduce the executive’s expected after-tax net variable pay,reduce the agent’s risk premium due to lower wage variance,and reduce the agent’s effort level.Under the influence of uncertain variables,executive effort levels decrease with higher bonus taxes,and variable pay shifts to fixed pay with higher bonus taxes.Finally,the full paper is summarized and an outlook of the problem study is provided. |
