The Study Of Managers' Incentive & Supervision Mechanism In State-Owned Commercial Banks

Recently, state-owned commercial banks in China are confronting a bad condition: many joint-stock commercial banks in China are growing fast, more and more foreign banks are entering into China, which is a great challenge to state-owned banks, especially in the contest of human resource. Thus, to build a reasonable and effective managers' incentive & supervision mechanism is one of important issues in the reform and development of state-owned banks. At first, this paper introduces general theories on the manager's incentive & supervision, which focuses on four aspects: human capital, principal-agent, beyond property-right argument and behavior science school. Then, this paper thoroughly analyzes the incentive & supervision condition of managers and relative issues in state-owned banks; After analyzing the successful experiences: short-term incentive forms of listed banks in China and long-term incentive forms of foreign banks, it puts forward an innovative mechanism of managers' incentive & supervision in state-owned banks, combining with their characters. In the aspects of incentive, it adopts an annual salary scheme, a stock option plan based on EVA and a reputation incentive. And in the supervision of managers, it not only improves the corporate governance, but also promotes the competition and development of markets, especially manager market.There are three innovations in the paper. At first, it points out that the administrative appointment of managers and the absence of effective principal are the radical reasons for the lackage of incentive and the shortage of supervision respectively in virtue of game theory and principal-agent theory. Anther one is the design of annual salary scheme with a bonus reserve, which is fit for state-owned banks' character- many branches. In addition, taking the factual condition into account, it brings forward a stock option plan based on EVA, which not only can avoid the disadvantages of general stock option, but also can exert its long-term incentive effect.