Study On The Relationship Between Executive Pay Gap And Corporate Performance

The separation of ownership and management in modern company produced the principal-agent relationship between the principal and agent. In order to reduce the agency problem in the principal-agent relationship and agency costs, maximize interests of the principal, most researchers think that combine the effective executive pay and corporate performance of incentive mechanism and operation mode, can cause the attention of executives of enterprise performance, and arouse the enthusiasm of executives to work. But there are many factors that affect the incentive mechanism, we cann’t connect the executive pay with corporate performance simply by direct proportion. When considering the corporate governance, institutional environment and individual contribution, pay gap will appearance in the erterprises inevitably, especially among the management team. With the improvement of information transparency and the prefection of executive compensation disclosure system, the executive compensation of listed companies growed in the high speed.What’s more, the pay gap in senior management team amplified astonishingly,which it violated the Chinese traditional culture to some extent advocated egalitarianism. What do widening wage gap influence enterprise performance? Can the pay gap become the favorable factors of executive compensation incentive mechanism? What factors determine the pay gap? All these issues are the main problems we will dicuss in this paper.This paper summarized the related literature at home and abroad, basing of related theory and combining the China’s institutional background, selecting Shanghai and shenzhen two city in2006-2011annual report data of listed companies as the research sample, using SPSS17.0statistical software tries to from the empirical evidence level perspective the rationality of the pay gap within the senior management team in our country at present stage, and verify that the factors that affect the salary gap, hope for the future perfecting the incentive mechanism of executives of significance of reference to the proposed empirical evidence. In this paper, we gain the conclusions as follows:firstly, the tournament theory generality of listed companies in China:a pay gap has a promoting effect on enterprise performance, based on the point of championships, the pay gap is designed to encourage employees in order to better job or pay, improve the performance of enterprises.Secondly, the board of directors, board of supervisors performance failure, low executives shareholding is present within the senior management team salary gap is the main reason of excessively high; Thirdly, high proportion of independent directors, to strengthen the senior management team within the positive relationship between firm performance and pay gap;At last, chairman and general manager in both concurrently hold the position of the company, senior management team within a positive relationship between firm performance and pay gap may be weakened. Above the study of the problems of the compensation incentive system and to give full play to the company to perfect our salary incentive mechanism, reform and development of modern enterprise management system, improve enterprise performance, promote the development of society more stable.