EVA-based Top-manager Compensation Incentive Mechanism In CHINA SHENHUA

Since Chinese economic reform, Chinese economy is developing very fast. By reforming the policy of shareholding, state-owned enterprise keeps increasing the efficiency of operation and the level of management. On the one hand, because of the separation of operation rights and management rights, there appears the phenomenon that operator’s behavior goal and owner’s value goal are separated. The difference of many state-owned executives’ pay and performance is not obvious. No one is really responsible for the state-owned assets. As a result, the remuneration of senior executives of state-owned enterprises has been a great concern. In order to cure the problem of the state-owned enterprises’ executives’ low management efficiency and overstaffing, establishing a reasonable and effective executive compensation incentive mechanism is the key to the problem. On the other hand, the SASAC’s evaluation of the performance of these state-owned enterprise is no longer confined to the traditional evaluation of the revenue and profit, but will gradually shift the focus to the point whether the enterprise can create value or not. As a result, researching the salary Incentive Mechanism of state executive and become a fundamental issue in the development of state-owned enterprises based on how to accurately assess the ability of enterprises’ creation.This paper illustrates the necessity and significance of researching the state-owned enterprises executive compensation incentive mechanism, and do a systematic review on some papers on the relation between executive compensation and corporate performance. The method of research is focusing on researching some typical cases, selecting representative China Shenhua as a case material. First of all, I analyze the composition of China Shenhua executive compensation incentives from annual salary and equity, and the comparison of the trend of change of the EVA value and the salary of executive compensation from 2005 to 2014. Based on this, I find China Shenhua current executive compensation incentives problems from the aspects of contract, the pay structure, assessment indicators. Then, I do a separate analysis on establishing a executive compensation incentive mechanism based on EVA, and compare EVA with traditional performance evaluation index, and finally make a thorough research on how to use EVA to evaluate China Shenhua. I can conclude from the above research that the EVA-based performance appraisal is more real objective than traditional methods to reflect the performance of the company. Next, I do a deeper analysis on some valuable points of the above < Heads of central enterprises operating performance evaluation Provisional Measures>, and give some advice about the EVA-based performance appraisal of China Shenhua. Meanwhile, I also give the advice from the establishment of the EVA awards treasury and the implementation of the EVA based stock optionsOn the whole, the EVA-based executive compensation incentives applied in China Shenhua are still facing many problems. As a result, we should establish and improve executive compensation with Chinese characteristics based on EVA to better promote the development of China’s state-owned according to China’s basic national conditions, combined with practical conditions of China Shenhua. Conclusions of this paper have a great impact on letting state-owned enterprises take reasonable incentive pay mechanism and keeping the sustained and healthy development of state-owned enterprises under current situation of executive compensation regulation.