Improvement Of State-owned Enterprise Managers Pay Incentive Model

The competition of enterprises is the basis of market economy, which to certain degree is competition for competent managers. So it is an important topic for contemporary enterprises to study how to build effective incentive and restraint mechanism to encourage managers'initiative.Presently, state-owned economy dominates the national economy. The reformation of financial incentive schemes for state-owned enterprises'managers has been deepening as the reformation of the wage and income distribution system, but there still are many issues, such as deviation of managerial behavior, losses of talent, great damage to the stakeholder'benefits. These issues also increase the cost of agents, damage the long term and stable development for state-owned enterprises. So how to build effective financial incentive scheme for managers is a key issue for state-owned enterprises'reformation and development.This paper looks at the actuality of present compensation model for the managers of state-owned enterprises, and some defects have also been identified, such as the disparities between performance and compensation, the single merit index, the lack of long term incentive and the plan of managers'abdication, and the pernicious inflation of perks. A new set of compensation scheme has been suggested with references to other research and which tries to confirm the composition of the managers'compensation. On one hand this scheme can protect managers'long and short term interests which can be objectively reflected by compensation, on the other hand it can combine the managers'compensation with the contemporary and future enterprises'growth, which at the same time can contribute to the increased value of the assets of state-owned enterprises.