An Empirical Study On Executive Compensation System And Internal Control Effectiveness

Corporate governance structure is the basic factor to establish enterprise and implement the effective internal control. There are so many different understandings of Corporate governance structure, but they could be interpreted as the power balance relationship of Right, responsibility and interests among the shareholders, directors and managers. The core problem of Corporate governance structure how to solve the principal - agent relationship arising in the the separation of ownership and business. Under modern enterprise system, the senior managers control the main enterprise operational power, their decision-making on business related to the company's success directly. Establish a scientific and effective system of executive compensation, to link the interests of the senior managers to corporate performance and management, so there could be an effective incentive and restraint mechanisms. And thus a better solution to principal - agent problem, and further to form an effective corporate governance structure, to achieve the purpose of internal control system. In recent years, the manner in which senior executives of listed companies in China to conduct an effective incentive and restraint, and theoretical circles and practice becoming a hot issue of contention, whether it is annual salary system, or equity incentive system, with the ultimate goal is to encourage the management of to their own interests and enterprises of the same performance-related, reducing principal - agent relationship between the formation of the agency costs. However, whether the implementation of internal control mechanism to play its due effect, business performance, agency costs and executive compensation system, the correlation between how in the end, this is the This article attempts, through empirical research to answer.In this paper, the Yangtze River Delta region (Shanghai, Zhejiang, the Soviet Union three provinces) in the Shanghai-listed 298 companies as samples, on firm performance, agency costs and incentive compensation for executives correlation analysis, trying to find the correlation between them, and on the Optimization of executive incentive compensation, controlling agency costs and enhance business performance of the countermeasures and proposals. The article is divided into six parts:Part I: Introduction, focuses on the purpose of writing papers, meaning, literature review, papers may be innovative, you may encounter problems, research methods papers such basic questions. PartⅡ: Introduction to executive compensation systems and internal controls related to the support of the theory to construct a thesis theoretical framework.PartⅢ: Introduction of China's listed companies, the evolution of executive compensation system, and the status quo.PartⅣ: Empirical analysis, according to 207 Shanghai-listed company's 2007 Annual Report Data for the study sample, using data envelopment analysis model and the regression model built using EVIEWS software business performance, agency costs and CEO pay incentives of correlation between the empirical analysis.PartⅤ: The executives of listed companies in China pay system and internal control recommendations.PartⅥ: Conclusion, review of this research method and research process to identify the limitations of this study. Thus provide direction for future research.