| Since the financial crisis caused by the U.S. subprime mortgage crisis sweped the world, many of the world’s major financial institutions have stepped into financial trouble in the year2007. In this context, the global economy went into an unprecedented panic, however, executives on Wall Street financial institutions are still enjoying sky-high salaries. Discussion on executive remuneration under the financial crisis intensified, culminating in one of the worldwide wave of executive remuneration regulation. Executive remuneration became a hot topic under the current international context.Unlike the most of western countries, the state-owned enterprises occupy an important position in China’s national economy, so the state-owned companies’ executive incentive problem is particularly important. As a phenomenon of remuneration regulation transition economies, government-enterprise relations can not be avoided, especially the important relationship between local government and local state-owned enterprises. The main feature of China’s transition economy is "big government, small market." In the process of economic transition, both of the decentralization reforms between the government and local governments and the market-oriented reform of enterprises become the focus of economic development and enterprise relations. According to the author’s estimation, from2006to2011, either the executives of central-level SOEs or the executives of local-level SOEs, their annual salary showed a rising trend. The executives of central-level SOEs got an annual income from652,400yuan of year2006to1,180,000yuan of year2011, with a growth rate of12.65%. The executives of local-level SOEs got an annual income from189,300yuan in2006to337,700yuan in2011, by12.27%. In the year of2011, the highest annual salary of SOE executives was529.64million yuan.Whether the rising executive pay could reflect its wealth creation for the company or not has become a hot topic. Under the background of remuneration regulation, this paper has studied executives incentives of SOEs, compared the incentive effects of the central level and local-level SOEs in executive pay, and analyses the existing incentive effects to explore the nature of the relationship between executive incentive and market value. The paper wants to enhance the market value produced by executive remuneration and provide a scientific and reliable incentive system for SOEs.Idea of this paper is as following. Firstly, the paper expounds the theory and reviews the empirical research to identify the limitations of existing studies and the proposed research direction. Then it analyses the composition and status of executive remuneration, remuneration regulatory background, executive incentive compensation path and the impact on the market value. Then it produced comparative analysis of the impact on company’s market value by executive pay of central-level SOE and local-level SOE through building a model, and demonstrates the research hypothesis. The results are showed:under the control of remuneration regulation, executives’ annual salary and levels of shareholding of central-level SOEs have a significant positive effect on the market value; executives’ annual salary and levels of shareholding of local-level SOEs don’t have any significant positive effect on the market value. The last part is conclusion and suggestions for executive incentive designation of SOEs at different administrative levels according to the findings.The innovation of this paper are:Firstly, this paper carries out the study by building a suitable model to features of SOEs; Secondly, the study considers the background of remuneration regulation; Thirdly, SOEs are divided into the central-level and local-level SOEs according to the different administrative levels, and targeted study the incentive effect of these two types of SOEs’ executive compensation, and raise recommendations of remuneration design. |
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