A Study On The Influence Of Internal Controls Quality Exerting On The Sensitivity To Which Degree Chief Executives' Pay Have An Impact On Corporate Performance

During the recent decade, the subject of internal control in corporation has enter into both the theoretical and the practical circles, as it testified by the fact that the vicissitudes of public companies is the history of their failure of internal control.In recent years, these notorious fraudulent cases of public companies, represented by Qiongminyuan, zhengbaiwen, yingguangxia, Bahrain Bank and Enron,are all without exception related with the fail of their internal control mechanism, therefore, the completion and implement of internal control is increasingly turning into the focus of regulators and investors. More and more investors has come to realized that a company abounds with investment value is supposed to posses favorable business performance and development prospect, as well as ordered internal control, and to a certain extent, the fail of internal control would invite bigger risks than that of business performance slide would encounter. Hereupon we attribute the problem of business performance to its internal control, and small wonder it garners the attention of both the practical circle and the academia. But which is the most effective method to boost business performance? For so long, the factor of greatest concern is salary incentive, and its effect is expounded repeatedly by numerous pundits, as we say, it is hard to unravel, with linear relations, business performance and its multiple intrinsic factors of the company (the scale of company, the industry company engaged in, the salary motivation mechanism for its senior executives, the internal control mechanism of company).Whether it be the principal-agent theory, the signal theory, the motivation theory, or the contract theory, they are invariably abundant in supposed premises; while empirical research conclusions drawn from date of public companies, rely on proxy variable of data sample, metering method, company salary, business achievement and so on. Thus, Both the empirical research and the theoretical mode study, give an indefinite answer to the relations of company performance and its internal governance.In the probe of companys'senior management incentive issue, we'dbetter infuse the Model of Promotion into economy, legal system and institutions, and even humanistic environment. Actually, the quality research of internal control is a hotspot and nodus in the field of financial management research nowadays. Compared with probes and studies aiming at internal control system structure and quality measure of internal control in the academia currently, this article directs at the issue that the establishment of internal control system and the elevation of quality exert an influence on company's senior management salary and enterprise performance, that is, senior executive salary is susceptible to company performance. And this article is to probe the positive or negative effects which the setting up and amplification of the internal control system, the elevation of quality can exert upon its susceptivity.The article adopts 326 SMSE in Shenzhen Stock Exchange in 2009 as samples and analyse them in an empirical way to find out their economic inner links.Through computations and statistic tests, we find what those samples of listed companies on the SMEs board in China bear out:senior executive performance has a positive effect on company achievement, and well architectured internal control, refined system will lead to the senior executive performance positively influence company achievement further.In the end, to summarize the research results, I put forward following proposals: to set up effective and feasible internal control framework so as to perfect the internal control system which should comprise the following aspects:1. Regulating internal control system in accordance with the operation flow of company. Company is supposed to set up comprehensive internal control institution with a panoramic view. Any complete mechanism demands currently available truss. In the first place, we need to determine interior management system and management objective, including management mode, interior checking system, institution establishment and function division, etcetera, so as to ascertain internal control system design and its constructive orientation. Once established, the interior management system should maintain stable for a time, thus the stability of the whole system can be maintained, based on which internal control system and process system can be designed and drafted.To tighten grips on behavioral agent individual, and to truly carry out internal control work.Enterprise should, in accordance with the principle of market competition and that of survival of the fittest, adopt competition mechanism, forge employing mechanism that appoints people on their merits, equip itself with qualified talents for its own development's sake.2.In the first place, improve the quality of managers. The quality of managers plays a vital role in enterprise operation and management, and managers with different qualities, can exert diverse influence upon the development of enterprise, which further influence the efficiency and effectiveness of company's internal control. Managers'quality comprises knowledge and skills, as well as moral outlook, sense of worth, world outlook and various aspects. In the second place, improve the comprehensive quality of accounting personnel and correlative person liable. We are to carry out professional ethics education, to educate pro and con related personnel with ideological and political education, such as law and discipline, government discipline, to enhance their ability of self-restriction and highly-developed sense of responsibility, to make them voluntary compliance with and implement various discipline and regulations and be responsible, law-abiding, honest and self-contained.3. Reinforce examination and assessment of the implement of internal control system, and set up effective excitation mechanism.To guarantee effective implementation of companys'internal control systems, and to perfect them, company is to exam and assess the implement of internal control system regularly in order to observe whether it is effectively carried out, and what is its effects and problems in the course of its implement, thus modifies and adjusts the controlling unit and the measures concerning, propels internal control gradually reasonable and effective.Those departments and individuals who rigorously execute internal control mechanism be granted the spiritual and the material rewards; whereas those who violate regulations be adamantly given administrative sanction and economic punishment, linked with postion promotion or demotion, professional title appointing in order to achieve the end of internal control.4. Set up benign information sharing system and guarantee the effectiveness of firms'internal control. A benign information sharing system can equip company with its operation conditions, the circumstances of its organizations, provide overall, prompt, accurate information for the firms'production operation decision, and bolster communications between departments and personnel concerned. Accounting system of enterprise is the foremost subsystem in MIS, an organic whole that organizes and processes accounting system and provides financial and decision information as well as assists company in management control.Thus, we must strengthen the construction of accounting system and the construction of information sharing system in other aspects.5. Properly treat the relations between cost and benefit.The core purpose of enterprise operation is to maximize its economic benefit, the formulation and implement of internal control mechanism also closely centers on the core objective. In actual practice, it is difficult to make overall assessment for the efficiency and effectiveness of internal control, therefore, dealing with the relations between internal control cost and efficiency of company becomes the crux of whether internal mechanism can effectively implete and operate.In brief, company should set up internal control mechanism, and enhance its sanction. Currently, the measures of company internal control comprises separation of incompatible duties (that is authorized approval system, business handling, accounting logging, property taking care, separation of audit and check), authorized approval control, accounting system control, budget control, property preservation control, risk control, internal reporting control, electronic information technology, etcetera. So long as enterprise management level attaches importance to and remains committed to internal control and management, internal control system will play a potent role in enterprise operation.