Enterprise Life Cycle, The Gap Between Executive Pay And Corporate Performance Study

Compensation strategy includes compensation level, compensation structure and the selection of compensation strategy mode.It is an important part of business management.In recent literatures, compensation gap is becoming a hot research scholars. Although there is a larger debate in the role of the pay gap on performance, the study on the influencing factors of the views is on the basic line.Compared with the traditional enterprise, high-tech enterprise has innovation, high growth, high yield and high risk characteristics, leading to the compensation design pattern will be different from other general enterprises. The former scholars, who study the R&D personnel salary design in the high-tech enterprise, also apply the enterprise life cycle theory, to explore the different compensation strategies in the different life cycle. However, the previous study about the identification of enterprise life cycle, more just from qualitative level classification. Even the quantitative classification is the continuous time within a few years. It is also against with sensitive to the time, and the high-tech the corporate high-growth, high-risk characteristics contrary.This thesis chooses the representative of the high-tech industry--the pharmaceutical industry, and uses Dickinson’s cash flow method firstly in influence factors analysis of the CEO pay gap. Using the method, we divide the date of65listed pharmaceutical companies from2006to2010into five stages of corporate life cycles in order to make an empirical analysis.The results of studies indicate:there is a positive correlation between the CEO pay gap and firm performance on the listed pharmaceutical companies, which support tournament theory. In addition, If the corporate is in increase period or has high state share proportion, the positive correlation between the CEO pay gap and firm performance will be weakened significantly.The main innovations of this study are:1. When the empirical study about the relationship between the pay gap of top management with the performance of company, tournament theory and behavioral theory seems to explain. So this paper attempts from the perspective of enterprise life cycle, in order to distinguish different situations and explore the applicability conditions of two kinds of theory. 2. Verify the existence of the enterprise life cycle effect. Whether the enterprise life cycle will regulate the relationship between the pay gap of top management with the performance of company.