Study On Incentive Efficiency Of Executive Compensation In Listed Companies

In modern enterprise system, compensation incentive is one of the most important modes for modern enterprise to motivate executives. Enterprise’s ownership and management authority are separated from each other; there is the target inconsistent and asymmetric information between the owners and operators. When the owner cannot fully supervise, how to motivate operators has become a very important issue. Executives, namely senior management of the enterprise, act as the role of agents; their business decision-making is directly related to corporate performance and future growth. At present, the incentive of corporate executives has become a very popular topic; and the incentive of executives in listed companies has also become the basic problem of operating efficiency. Therefore, it’s highly essential to prove up the effect of executive compensation incentive, to explore a more reasonable executive incentives, to reduce agency costs, to make it more justice, logical and perfect, and to improve the operating performance of listed companies, to ensure our enterprise long-term and stable development, and remain unbeaten in international competition is particularly necessary.This article will dominate on empirical research, take Shanghai and Shenzhen listed companies of China in2008-2010as samples, comb related concepts of incentive efficiency of executive compensation and related theories including principal-agent theory, human capital theory, and property rights theory. It will analyze incentive efficiency of executive compensation in listed companies by three-stage DEA method and SFA method in order to provide the necessary theoretical supports and references on the design for enterprise executive compensation incentives and improving business performance.This paper gets the following conclusions:First, the results by three-stage DEA method which removes environment variable and random error are relatively accurate than traditional DEA calculation. At the same time, the comparative analysis shows that the three-stage DEA method proceeds consistent with SFA results by consideration of environmental variables, but the overall executive incentive efficiency is not high. Second, due to the different corporate governance environment and the external market constraints, the executive will have a significant difference even with the same corporate governance mechanisms. So, it will cause equity incentive into acclimatized state by just simply apply instead of be localization. Third, executive cash compensation is still the active force to promote the business value by the SFA evaluate method of the incentive efficiency of executive compensation for listed companies. We can improve the incentive efficiency through increasing corresponding inputs. Executive equity incentive efficiency is not obvious, and therefore the enterprise needs to strengthen the strength and depth of executive equity incentive and increase the rationality and normative of incentive stock options to make equity incentives to play a real incentive effect. Fourth, in the environment variable, the stake ratio of the largest shareholder in the outstanding shares and asset-liability ratio have a positive impact on incentive efficiency of executive compensation, the proportion of independent directors and firm size have a negative impact on incentive efficiency of executive compensation.