State-owned Holding, Government Intervention And Executive Compensation Incentive

Executives are the most important and scarce human resources. In moderncompany, executives (as the agent in principle-agent relationship) often have conflictsof interest with the client. It has been the focus of theory research that how to carry outthe effective incentive and supervision to make them give full play to their businessmanagement function. Executives incentive theory originated in the west, and hasalready obtained some empirical supports. However, these theories do not necessarilysuitable for China, which is in the special period of economic transition. The systemenvironment may have great influence to enterprise executive’s incentive in Chinesespecial socialistic marketing economical system. In this paper, executive pay incentiveare analyzed respectively from the two levels that “total compensation” and “salarygap”, and the results may provide necessary support to the design of enterpriseexecutive pay incentive.Based on the background of Chinese listed companies, this paper analyse andsummarize the principal-agent theory, championship theory, behavior theory and otherrelated theory, induce and generalize the domestic and foreign relevant research, use thedata from listed company prove that just depend on “increasing total compensation” or“expanding salary gap” can’t achieve the expected effect of salary incentive.Then “stateholding” and “government intervention” the two factors with Chinese characteristics arecombined in further research. In this paper, executive pay incentive distortion aredivided into incentive excessive and underexcitation, the salary gap is layering designed.The empirical results are:(1)In underexcitation enterprise, Balance and executive payinsufficient incentive is a significant negative relationship in non-state-owned holdingenterprise, and the state-owned holding enterprise are not.(2) In incentive excessiveenterprise, Balance and executive pay incentive excessive are both have positiverelationship in non-state-owned holding enterprise and state-owned holding enterprise,just the state-owned holding enterprise is significantly positive related.(3) In companieswhose internal salary gap are not big, appropriate salary gap is benefit to improve theenterprise performance, there is no need to carry out the government intervention; incompanies whose internal salary gap are exorbitant, it is unwise to keep on enlargingthe salary gap, the government should practice enough regulation in those companies.The characteristic of this paper is that “state-holding” and “governmentintervention” the two factors with Chinese characteristics are combined in the researchof executive pay incentive and its effect, and obtain certain valued conclusions. The design of executives’ salary incentive system in our country is a complex and dynamicprocess, the enterprise internal management mechanism, and external macroenvironment, regulations and policies of the state and human capital characteristics areinfluence factors can not be ignored. It is necessary to take enterprise internal andexternal actual condition into consideration, that is to say, we should case by case. Thestudy results of this paper may provide certain reference for the reform of salarysystem, the construction of incentive mechanism and the advance of enterpriseperformance that are practiced by listed companies, the government and other relatedadministrative department...