Free Cash Flow And Executive Dominance Pay, Empirical Research Pecuniary Relations

Executives are implementers of corporate strategy, as well as the core of theprincipal-agent issue. How to effectively motivate executives’ efforts to maximize theirbusiness potential and how strictly bound executives’ behavior to protect the interests ofshareholders are the enduring core topic in corporate governance theory, at the meanwhile,the crux of corporate governance practices. Whether the compensation contract ofexecutives is reasonable or not is directly related to the enterprises’ operational efficiency.The officials’ salary of listed company, Chairman and CEO of PING AN Mingzhe Ma66million in China in2008, has attracted worldwide attention currently, not only fiercedebate in academics also in entrepreneurs’ level. The concentration of the debate is notonly focused on the huge amount of salary itself, but also the matching degree of actualcontribution of corporate executives and remuneration executives obtained.Performance of the company as an important measure of operating efficiency target isfrequently combined with executive compensation in research, at the perspective ofexploration of current executive compensation mechanisms. However, with the companyprofits and low asset-liability ratio, in2008, there emerged bankruptcies of small andmedium enterprises represented by the Pearl River Delta and the Yangtze River Delta ofChina. What happened is defined as the Black Bankruptcy Phenomenon withinprofit-making enterprises. The profit does not translate into cash flow is the crucialmechanism of Black Bankruptcy. Since then, management philosophy of "Cash is theking" is widespread concerned not only in academia, but also in the business practice level.Based on the above background, measuring the Information Technology industry,A-share listed companies in2010~2012in Shanghai Stock Exchange and Shenzhen StockExchange, as the sample data, this thesis focus on the relationship among free cash flow,executive official payment and company-paid consumption at empirical study level to digthe compensation status of the separation of ownership.