Performance And Incentive Mechanism

To find an approach to set up a modern enterprise system, which can separate the government and enterprises, clarify the property, clarify the rights and responsibilities, optimize the administration, China is undergoing the reforming of state-owned enterprises and enlarging the area and amounts of the listed firms from the1980es. The stock market has become the main part of china's economy and played more and more important role. Up to Dec 31st, 2007, there are 1530 listed companies, 1695.5 billion shares with total value of 32714.1 billion Yuan and total mobile share's value of 9306.4 billion Yuan in the stock market. Most of the listed firms in China were state-owned enterprises so that the government has a majority of the shares and nominates most managers. Most of the managers (agent) don't set the aim as maximizing the shareholders'(principal) benefit. The principal-agent problem exists in many listed firms..The purpose is to realistically describe the relationship between performance and managers'rewards in the listed firms, to search for the approach of setting up incentive and restricting mechanism in accord with market economy rules, and to give some suggestions of improving the performance. The basic method is theoretical analysis and empirical analysis. The sample is some listed firms in Shanghai and Shenzhen Securities Exchange. Refer to the existing research efforts, this paper finds out that the managers'are underpaid, administrative costs are high, payment structure is simple, and salary gap is big. Paper come to the conclusion that the listed firms should establish the payment system including long-term and short-term payment, change the payment structure, make the administrative cost clear, standardize the human resource market of managers, optimize related policies, strengthen the capital market.