Shareholder Wealth And Executive Compensation Incentives

Executive compensation has been a key issue for corporate governance. Financialexperts have been focus on discussion of how to define a reasonable executivecompensation that executives can create more wealth for shareholders to achieve financialgoal-maximizing shareholders’ wealth. This paper aims to study the relationship betweenexecutive compensation and shareholders’ wealth, and explore a shareholders’ wealth-based executive compensation road, in order to motivate executives for our shareholders’wealth.This paper selects the2010-2012datas to study the relationship between executivecompensation and shareholders’ wealth. Respectively,the empirical part verify the cashcompensation and equity compensation with shareholders’ wealth in both the absolute leveland change level. This paper mainly explores the following questions:(1) whether there isa correlation between shareholders’ wealth and executive cash compensation or equitycompensation;(2) For shareholders’ wealth, whether executive compensation is still sticky;(3) whether the nature of actual control, board characteristics affect the sensitivity betweenexecutive pay and shareholder wealth;(4) whether the excess executive compensation candamage the shareholders’ wealth.The main results are:(1) executives cash compensation and shareholders’ wealth showa significant positive correlation, but for equity compensation, the correlation exits inchange level, disappears in absolute level.(2) executive cash compensation is sticky,butequity compensation is not.(3)the nature of actual control, board characteristics affect thesensitivity between executive pay and shareholders’ wealth.(4) excess executive paydamages shareholders’ wealth.