On The Legal Regulation Of Executive Compensation In Listed Companies

In the 1930 s,Berle and Means based on the premise that the study of separation of ownership and managerial authority to do classical analysis about the conflicts of interests between principal and agent from an economic perspective,and the classical analysis lay the theory foundational for research of modern corporations.Jensen and Meekling raise the found of economist and develop the theory of principal and agent,which had become the foundation of many subjects' research about executive compensation.Listed company is distinctive because public,and its the system of executive compensation is the key in the theory for company governs and practices.In order to solve the problem of agency,it is the direction of the design of executives and the companies.But,before stock option incentive appeared,many kinds of incentives have limited effect on the consistency of target function and the non-equity of executive compensation has weak relation with executives' performance.Naturally,shareholders and policymakers are becoming increasing dependent on equity compensation to enhance the consistency of target function.Since the 1950 s,when U.S.listed companies began to introduce stock option incentives,and incentive compensation is an absolute majority in total amount executive compensation.It becomes the preferred method to increase the consistency of the target,and finally stock option incentive becomes the main part of executive compensation,so the system of stock option incentive and compensation system become gradually synonym.With the practice of the compensation incentive system of listed companies,and executive compensation is rising.And the phenomenon of incredible compensation continues to appear,which arouses "public outrage",the model of salary incentive based on stock option is widely questioned.Listed companies begin to adopt the restricted stock plan,but the plan can not change the basic fact that the salary system is alienation.Listed companies' the executive compensation incentive system of design is widely believed to the critical path that reduce agency costs and promote the agency problem is solved.However,when compensation system is influenced by objective factors,such as the market rally,or the interest rate change,the senior executives of a company could always gain unexpected windfall.Since the senior executives infringe the rights and interests of the enterprises,shareholder,and stakeholder through setting the huge wages for themselves,making a false about financial date,distorting and concealing the disclosed information,and using the exercise rules maliciously to get the high salary,the salary gains that have unhooked connections with enterprise performance indicate the distortion and alienation of the compensation system of the listed companies.The equity incentive system led by stock option plays a crucial role in the compensation system alienation of senior executives.Therefore,the stock option could be regarded as the reason that the compensation system of senior executives disordered.Another reason is that "measures on administration of equity incentive for listed companies" has been implemented.This paper will discuss equity incentive with one chapter.The salary incentive incentive system was created for solving the agency problems,but now it becomes a part of agency problems.Hence,here are a lot of research focusing on the theory and practice of corporate governance,with the goal of achieving compensation rationalization if we see this problem from the perspective of low study.The legal practice that problems the compensation rationalization of the senior executives in listed companies mainly exist in the company law,and it is reflected in the efforts from many aspects,including determination on remuneration,compensation information disclosure,judicial intervention.The basic idea is to solve the problem of compensation on behalf of the system with a single layer of the corporate governance structure,with the independent director system as guarantee,enhance the independence of the compensation committee,set American-style efforts to executive compensation plans,by means of independence and procedural justice,through careful compensation disclosure rules to ensure compensation rationalization.In terms of compensation rationality,the judicial practice has formed three standards,thus promoting the formation of business judgment rules.Now,the court usually refused substantive examination on the rationality of the compensation.In contrast,the tax law and accounting rules are more willing to adjusted to tax leverage high compensation,although this will backfire effect,also show the intervention of the government to pay for.German,the other is a German emphasis on pay decisions have pay reasonable attention obligation.Supervisors in pay decisions you need to follow the "rationality",director of the office,the company's health,performance and usually pay levels and other factors are to determine factors should be considered when executive pay,so can to a certain extent,to curb executive pay advance.Although such standards are still lack of objectivity,the standard for court and examine the reasonableness of the compensation standard for discussion,and the German court also more willing to review the rationality of executive compensation,and the related policy also have no preferential measures of equity incentive,so the German executives of listed companies pay no prominent as the British and American.Executive compensation of listed companies in our country also appeared the serious alienation.In 2006,the China Securities Regulatory Commission “the listed company equity incentive management approach(trial)” before,and there has been companies such as China's ping an applicable virtual stock incentives to launch equity incentive plan,and formed the first wave of executives of listed companies in China for the impact of the compensation,coincides with the world financial crisis,the frequent emergence of huge pay formed a huge challenge to the traditional allocation,it triggered a public debate.Nevertheless,the implementation of the reform,such as YiLi company,has led to a wave of wealth-creation movement after the MBO reform.Executive compensation system of listed companies in China despite the ridicule,but it does not stop the pace of reform.In 2016,on a trial basis for more than ten years of "measures for the management of the listed company equity incentive" was officially launched,has a more comprehensive to the equity incentive,specification,and complete system for the perfection of the listed company executive compensation incentive system in China has a more urgent requirement.Our country "company law" established by the governance structure is based on the framework of two-tier system,and with the system of the Britain and American countries emphasize the independence of the design as the means.The legal was purpose to deal with executive compensation problem by independent directors,specialized committees,commissioned for voting for the listed company.But the realization of independence was extremely difficult,in our country had higher difficulty.China's capital market not mature enough,such as state-owned enterprises reform was into the deep water area,under the transition economy and the management of environmental monitor,China's listed company ownership structure,corporate governance structure and external regulatory environment were unique,were difficult to learn German to prior control,on the rationality of compensation was also difficult to completely follow only the practice of procedural justice in the United States.This thesis thought that reference lessons from Japan and South Korea the general meeting of shareholders and the board of directors of the model of decision together,and the total amount of the shareholders' general meeting decided to executive pay and form,and the board decided to pay in the specific allocation of gross amount and compensation in the form of a specific implementation plan.The state-owned listed companies governance at present stage and auxiliary power,namely the body of the sponsor responsibilities should be actively involved in the shareholders meeting,intervention in the form of executive compensation in legal way and the total is the effective way to resolve the executive compensation rationality.At the same time,pay decisions,equity incentive system,salary system of information disclosure and construction and perfect the judicial intervention of executive compensation,compensation disclosure system should be the key to working out the problem.The article is divided into eight parts:Chapter 1: Introduction.This thesis puts forward the legal regulation of executive compensation of listed companies,and points out that in 2016 the measures for the administration of the listed company equity incentive formal way,with the reform of mixed ownership,executive compensation of listed companies will be in a few years later another arouse a new round of high salary,a recurrence of the listed company executive pay legal regulation of realistic demand.In the introduction part,the research significance,research status,research methods and article structure are also introduced.Chapter 2: The problems' analysis of executive compensation exists in listed companies.Based on the definition of the executive and executive pay of listed companies,this paper points out that the relationship between executives and companies should be employment or service,and the company law should be the main adjustment.Based on human capital,agency cost,manager market and management power theory,this part makes a reasonable logical explanation of executive compensation incentive in listed companies.It is worth emphasizing that management power theory,based on the view of manager control,puts forward that management power plays a vital role in the conclusion of compensation contract.The independence of the existing corporate governance structure of the board is not enough,to rely on the objective of the management mode,management incentive stock option with equity,get paid,distortion compensation structure,compensation incentive system of alienation,and even had a negative incentive.The premise of the tradition of theory about fair trade is the assumption of fair trade.The theory of management layer also proposes that equity assumption is divorced from practice.Before the introduction of equity pay incentive,the agency problem about compensation already exists,but the stock option leads to the generation of out-of-control compensation.The system of executive compensation incentive of the derailment,and the phenomenon of out-of-control compensation is motivation that the legal regulation of executive compensation of listed companies.This part also analyzes the legitimacy of the legal regulation of executive compensation in listed companies,the efficiency of corporate regulation,the maintenance of order,the value orientation of achieving fairness,and the regulatory objectives.Chapter 3: The decision power of executive compensation exists in listed companies.Executive compensation is determined by the company.The company law needs to intervene within a certain limit to the articles of association.This section introduces and discusses the intervention of executive compensation decisions in company law of Britain,America,Germany and japan.In the shareholders' autonomy,a huge challenge compensation market is facing a crisis of Britain and American countries compensation right,to determine the independence and procedural legitimacy principle,through the system of the special committee,information disclosure system,tax law and accounting system to deal with,avoids to pay the rationality of the substantive examination practice,but its effect is how,and this need to be testified by practice.In Germany,the board of supervisors has the advantage of rank,and has a decisive power to decide the remuneration of directors.Germany stipulates that supervisors should consider the combination of directors' position,company status,performance and general salary level in the determination of salary,that is,the "appropriateness requirement" should be followed.The decisider of compensation has obligation about reasonable salary,and German court is more aggressively to substantial compensation rationality review,and it should effectively control the German executive compensation of listed company's overall level and growth rate.Britain and the United States have made a limited change in executive compensation decision-making power,and that is the establishment of shareholders' remuneration right of discourse system and the enhancement of the independence of the remuneration committee.Executive compensation decisions for day-to-day management based on knowledge should be for the board of directors to exercise the shareholder of Britain and American have limited change in shareholder discourse power,namely shareholders can vote on executive compensation,but not binding on the board of directors.However,it is an objective fact that the attitude of shareholders has at least a certain pressure on the board of directors and managers.The compensation committee,independent of the transformation from the giving greater compensation scheme of power,and the independent directors have many constraints about independence,such as forbidden cross-holding posts,limit the amount of remuneration,but no doubt,the effect is limited.The mutual protection of directors has a variety of dependence on CEO,which is hard to change.As for the practice of employing remuneration consultants,the promotion of independence is also limited.Chapter 4: The information disclosure system of executive compensation exists in listed companies.The information disclosure can promote the symmetry of information,and through the cooperation of other systems,and it can promote the symmetry of the information of the parties to the maximum extent.It is the key to working out the problem of executive compensation of listed companies.This part introduces and analyzes the reform of executive compensation information disclosure system of Listed Companies in developed countries dominated by the United States.The United States security market for information disclosure is very demanding,and executive compensation is required to complete information,even detailed disclosure,this is closely related with its emphasis on the principle of post supervision.Methods through the form of executive compensation disclosure based information disclosure of Listed Companies in the United States,to return to the main narrative disclosure form,disclosure based process of historical development,finally formed in 2006 to form the disclosure based narrative disclosure practices.In order to promote the overall understanding of salary information,SEC has made a change in how to design a comprehensive and reasonable disclosure system.In European countries,the requirements of executive pay disclosure of listed companies from simple,disorderly development to strict,standardized.Even in the executive compensation information has been carefully conceal mentioning Germany,from the total compensation disclosure,also for the transition to each member of the board of directors remuneration disclosure,and continue to progress.The German corporate governance code in 2002,after four revisions,eventually formed the current pattern in 2006,that is,the executive pay information of listed companies should be systematically disclosed.Chapter 5: The judicial intervention of executive compensation exists in listed companies.Judicial intervention is the last line of defense for the legal regulation of executive compensation in listed companies,which is of great significance.In this part first analyzes the theoretical premise,fiduciary duty and reasonable pay attention obligation of directors' responsibility,and discusses the necessity of judicial intervention in executive compensation.There are two paths of executive compensation judicial intervention,effectiveness,or program to develop the content of executive compensation for the defects can trigger the litigation of resolution flaws;the executive compensation for infringing the interests of the company can trigger the shareholder's representative action.The latter is the core path of judicial intervention.In view of the developed countries that judging the rationality of executive compensation should be paid to the market in theory and practice,the judge can not have no ability to judge,for justice,and people's subjective attitude,shareholder derivative litigation in executive compensation on a limited role.This part has three standards of review of the U.S.executive pay right,and that is a waste of corporate assets,breach of duty of care,breach of duty of loyalty(Self-dealing transaction),and the business judgment principle were introduced and analyzed.This article dissects the constraints of judicial intervention and makes clear the limitation of the role of judicial intervention.The article also introduces the situation of Britain,Germany and other countries,and finally discusses the right of remuneration recovery,pointing out that it is a new system interface of judicial intervention.Chapter 6: the equity incentive system exist in listed companies.The appearance of incentive form of stock option has completely changed the salary structure of listed companies.On the one hand,stock option can bring;unexpected wealth,on the other hand,it is easy to use the rules of operation,and eventually form high salary or even high price salary,which leads to the legitimacy crisis of executive compensation.The advantage of stock option is gradually reduced until its cost is reduced.The equity incentive of listed companies is closely related to the salary policy.The salary policy determines the keynote of the equity incentive,and can put the position of the equity incentive in the salary structure and salary level.In the premise of compensation policy for the management and control of the design,the biggest problem is the implementation of equity incentive plan performance reflects the distortion,unmerited;phenomenon,the equity incentive mechanism is easy to be distorted,which has become the key problem of salary formation,is the focus of regulation of the listed company's salary system.This part also introduces and analyzes the equity incentive system of Listed Companies in the United States and other countries.The perfection of stock incentive in the United States requires the company law,the tax law,security law,the accounting standards and the listing rules.Due to the inherent problems of the equity incentive system,it is difficult to work out through the external system reform.The improvement of the tradition of option system is the key to the perfection of the stock right incentive system.Chapter 7: The problem of executive compensation and the improvement of the legal regulation exists in China.This part is the foothold of the full text,the main point of view is that take the general meeting of shareholders and the board of directors to determine the executive compensation mechanism,that is,the shareholders' meeting determines the total amount of executive compensation,and the board of directors for specific allocation.On the decision of the intervention,proposed should be based on the reality,the decision mechanism of state-owned listed companies in the implementation of the administrative and market measures of compensation,comprehensively promote the market decision of executive compensation mechanism needs to be the conditions of success;on the executive compensation disclosure,advocated by the American model for reference,comprehensive,full the information disclosure of executive compensation;judicial intervention,and introduces the corresponding system foundation of our country,influence on the rules and compensation three standard,business judgment rationality of our country is analyzed.According to our country's the legislation and litigation practice,this paper analyzes the existing problems of shareholder representative lawsuit and puts forward some suggestions,meanwhile,evolution and development of China's listed company's equity incentive system is introduced,the compensation of alienation and problems of China's equity incentive system has analyzed,and put forward the performance evaluation index system alienation,unreasonable compensation,associated with the performance of low,easy manipulation of the equity incentive plan is endogenous crisis equity incentive system,in order to ensure the positive effects of equity incentive system,and puts forward some concrete suggestions to improve the problems.Chapter 8: The Conclusion.This part summarizes the whole article,and it points out the causes and difficulties of the executive compensation of listed companies.Meantime,this part evaluates relevant systems.Compensation decision and information disclosure system promote the key rationalization of compensation.Compensation decision is the starting point of salary problem,and there is no doubt that the effective control of executive compensation is the key to working out problem.Sufficient disclosure plays the key role in solving internal contradiction of the agency problem that information asymmetry.Sunshine is the best solution to corruption and complete information disclosure system could prompt the rationalization of compensation and solve maximally the problem of executive compensation in listed companies.