Corporate Performance, Executive Compensation And Asymmetry Of Compensation Change In State-owned Enterprises Of China’s Non-competitive Sectors

In the economic transition today, market-oriented path of state-owned enterprises isimperative. China’s state-owned enterprises mainly include the public nature field and thecompetitive field, of which the most controversial one is the public nature of thestate-owned enterprises led by the executive. This kind of state-owned enterprises involvesin important areas related to the lifeline of the national economy. However, there areproblems of unclear property rights, administrative intervention, governance failure, whichlead to the consequence of inflated profit and internal income distribution inequality. Atpresent, the focus of reform of state-owned enterprises have been transferred to the internalgovernance, such as overall listing, establishment of the board of directors, and theperformance appraisal. SASAC hopes to reduce the negative externalities of thestate-owned enterprises through the establishment of a modern enterprise system. Based onthe perspective of corporate governance, this paper makes research and analysis onphenomenon and essence of the income distribution inequality of state-owned enterprises,and provides suggestions for deepening the reform.The study finds that there are significant positive correlation and stickiness betweenexecutive compensation and corporate performance, while there is no clear evidence thatthe ordinary employees’ compensation is sticky, which indicates that in this kind ofstate-owned enterprises executive compensation incentive is excessive, while the ordinaryemployees’ compensation have great randomness and are lack of incentive pay. Furtherstudy finds that when the performance of company increases, the sensitivity of pay toperformance of executives is larger than ordinary employees. It means that there is severegeometrid effect in the compensation system in state-owned enterprise of China’snon-competitive sectors, which may also be one of the important reasons of the widener pay gap. The faster enterprise net profit grows, the deeper the gap between the two is.Good growth state-owned enterprises use natural advantage to create profit, which is thesubterfuge of executive compensation custom. Therefore, it is necessary to take measuresto improve the negative externalities that the public nature state-owned enterprises act onthe whole social economy.